For a value investor, a stock's price dropping usually merits
further investigation. Most Gurus buy stocks when they consider
them cheap. Therefore, when one of their stocks drops, it may
mean it is an even better deal than when they bought it, or it
did not appreciate the way they anticipated.
Ray Dalio
runs what was considered the most successful hedge fund,
Bridgewater Associates, for the last two years running. His
investment picks are also informed by his position on the macro
environment. These are the stocks that have dropped the most in
price since he bought them: Dell Inc. (
DELL
), Cliffs Natural Resources (
CLF
), Lam Research Corp. (
LRCX
) and Coach Inc. (
COH
).
Dell Inc. (
DELL
)
Dalio established a position in Dell in the first quarter of
2009, buying 419,750 shares when the price dropped to an average
of $9.50 per share. He then traded it intermittently over the
years and most recently made his largest purchase on record of
1,095,550 shares at an average price of $14 in the second quarter
of 2012. Dell has dropped 30% since he bought it, the biggest
loss of all of his holdings. It trades for about $10 on Thursday.
In the second quarter, when Dalio made his big purchase, the
stock lost almost 25%, including a 17% single-day drop in May.
That day, the company announced its first quarter results and
second quarter guidance below analysts' expectations.
In its fiscal first quarter 2013, Dell announced that its revenue
declined 4% year over year, and net income declined 33%. It said
it expects second quarter revenue to be up 2% to 4% sequentially,
below analysts' estimates.
Dell is working toward transforming into an enterprise services
and solutions provider. Enterprise solutions and services
businesses reached 50% of its gross margin in the second quarter.
The company continued to generate free cash flow, which totaled
$4.9 billion in the previous four quarters.
The stock declined further when the company announced further
declines in its second quarter announced August 21. The company's
revenue declined 8% and net income declined 13% year over year,
on slowed PC sales and a challenging macroeconomic and
competitive environment.
"Our performance in the second quarter provided another
proof-point that our long-term strategy is right," said Brian
Gladden, Dell chief financial officer. "We continued our progress
in shifting the mix of our business to higher-margin enterprise
solutions, led by solid growth in our server, networking,
services, and Dell IP storage businesses.
Cliffs Natural Resources (
CLF
)
Dalio bought 248,138 shares of Cliffs Natural Resources at an
average price of $56 in the second quarter. The stock has
declined about 30% since then to trade for $40 per share on
Thursday.
Cliffs Natural Resources Inc., formerly Cleveland-Cliffs Inc., is
an international mining company, a producer of iron ore pellets
in North America and a supplier of metallurgical coal to the
global steelmaking industry.
Cliffs Natural Resources Inc. has a market cap of $5.83 billion;
its shares were traded at around $39.83 with a P/E ratio of 4.8
and P/S ratio of 0.9. The dividend yield of Cliffs Natural
Resources Inc. stocks is 6.1%. Cliffs Natural Resources Inc. had
an annual average earnings growth of 25.2% over the past five
years.
Cliffs Natural Resources has reported some disappointing results
in 2012. Revenue declined 10% year over year, driven by lower
year-over-year pricing for the company's commodity products. Its
sales margin also declined 39% due to higher labor, mining and
maintenance costs.
Lam Research Corp. (
LRCX
)
Dalio established a position in Lam Research in the first quarter
of 2010, buying 36,400 shares at an average price of $35.50, and
traded numerous times since then. Most recently, he bought
147,839 shares at an average price of $39.50 in the second
quarter of 2012. The stock has dropped approximately 21% since
then.
Lam Research Corporation designs, manufactures, markets and
services semiconductor processing equipment used in the
fabrication of integrated circuits. Lam Research Corporation has
a market cap of $6 billion; its shares were traded at around
$31.78 with a P/E ratio of 15.9 and P/S ratio of 2.2.
Lam Research merged with Novellus Systems, a leading provider of
advanced process equipment for the global semiconductor industry,
on June 4, 2012, which the company believes will deliver "the
potential for accelerated growth." Its second-quarter results
reflected 20 days of combined financial results. The company's
revenue that quarter was $741.8 million and net income was $18.1
million, compared to $659 million and $45.6 million the previous
year.
Coach Inc. (
COH
)
Dalio bought 7,169 shares of Coach at an average price of $68.50
in the second quarter of 2012. The stock has declined
approximately 21% since then, to trade for $54 on Thursday. This
represents a mere 0.0062% of Dalio's massive $6.7 billion
portfolio.
Coach Inc. is a designer, producer and marketer of high-quality,
modern, American classic accessories that complement the diverse
lifestyles of discerning women and men. Coach Inc. has a market
cap of $16.15 billion; its shares were traded at around $54.32
with a P/E ratio of 16 and P/S ratio of 3.4. The dividend yield
of Coach Inc. stocks is 2.1%. Coach Inc. had an annual average
earnings growth of 26.2% over the past 10 years. GuruFocus rated
Coach Inc.
the business predictability rank of 3.5-star
.
Coach shares have declined 11% year to date. In their fourth
quarter results reported July 31, Coach had sales of $1.16
billion, up 12% from $1.03 billion in the prior year. Net income
was $251 million, or $0.86 earnings per share, up 24% and 27%,
respectively, from $202 million and $0.68 per share the prior
year.
The company benefited from efforts to grow its international
business, become a market leader in men's accessories and digital
sales. The company also accelerated its acquisition of Asian
distributors and increased its distribution in emerging markets
such as China.
To see
Ray Dalio
's portfolio,
go here
. To see more stocks that are trading for less than Gurus' paid
for them, try GuruFocus' Guru Bargain Screener.About GuruFocus:
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