The 7 best cheap stocks to buy, according to billionaire Ray Dalio

In this article, we will discuss billionaire Ray Dalio’s 7 best cheap stocks to buy.

Born in 1949, Ray Dalio bought his first stock, Northeast Airlines, at the age of 12. Later in 1971, he graduated from Long Island University as an investment manager. Before going to Harvard Business School, he worked for a time as a clerk on the New York Stock Exchange. In 1973, he became director of merchandise for Dominick & Dominick LLC. After a year there, he spent a year trading futures at the brokerage firm Shearson Hayden Stone before founding Bridgewater’s associates. He served as co-CIO and shares that position with Robert Prince and Greg Jensen.

Today, Bridgewater Associates is recognized as a leading asset management firm focused on providing exceptional expertise and partnerships to the world’s most sophisticated institutional investors. The company’s investment process is based on an understanding of how global markets and economies work, using cutting-edge technologies to validate timeless and universal investment principles.

Understanding Ray Dalio’s investment philosophy

A broader understanding of the “economic machine” influences Ray Dalio’s investment philosophy. An investment manager believes that understanding how the economy works is an essential part of successful investing. According to him, the economic cycle is divided into three main phases: 1) inflation, 2) disinflation and 3) deflation. Investors need to adjust their strategies after considering where the economy is in the cycle. Ray Dalio’s deep understanding of the broader global economy led him to correctly predict the Mexican financial crisis in the 1980s, validating his ability to spot threats and opportunities. He also believes that debt cycles play an important role in shaping economic and market conditions.

Ray Dalio realized that the economy tends to move in cycles, swinging between periods of growth and decline. This led to the development at Bridgewater Associates of the “All Weather” portfolio, which aims to minimize volatility in various market environments. According to him, assets such as stocks, bonds and currencies react differently to broader conditions. This is called inverse correlation. That’s why Dalio emphasizes that diversification remains key in managing risk in an investment portfolio.

Next, Ray Dalio believes in systematic decision-making. At the time of research, his principles were based on a data-driven approach. This means that it conducts research using historical prices, financial data and economic indicators so that it can accurately predict the direction of the market. It remains focused on maintaining decision-making processes based on rules, algorithms and data-driven analysis.

Ray Dalio’s investing principle, “Strategic Selling for Maximum Profit,” focuses on the idea of ​​making informed decisions about when to sell your investments in order to maximize profits while managing risk. At the end of Q2 2024, Bridgewater Associates had ~21.7% exposure to the services industry, ~19.6% to the technology sector, and ~12.1% to the consumer goods industry.

Bridgewater Associates’ View on U.S. Stocks

Since 2010, as the broader technology sector has seen a huge impact, outperformance in the U.S. has been across the board. The U.S. outperformance in terms of sales and margin growth was approximately half driven by the U.S. technology sector and half by other sectors, while the impact on P/E growth remained even greater for technology. In terms of contribution, Bridgewater Associates found that technology accounted for ~54% of the total 74% performance of the US stock market since 2010 compared to developed countries.

The investment firm believes that the development of some of the biggest factors influencing the outperformance of U.S. stocks should not be dependent on it. The direction of markets depends on the ability of American technology to deliver products and on Al’s ability to unleash productivity across sectors. This applies both to (a) directly the US Big Tech company, which currently accounts for over ~30% of the index and increased expectations, and (b) how Al/ML technology will help companies and how much of it will be included in the margins of these companies in various non-technology sectors.

Our methodology

To create a list of the 7 best cheap stocks to buy According to billionaire Ray Dalio, we looked through Bridgewater Associates’ 13F portfolio for Q2 2024. After extracting a list of its assets, we selected stocks that are trading at a forward earnings multiple of less than ~23.52x (because the broader market is trading at a forward earnings multiple of ~23.52x according to WSJ) and we’ve picked the 7 best cheap stocks to buy. Finally, stocks are ranked in ascending order by the fund’s holdings in them.

At Insider Monkey, we’re obsessed with the stocks that hedge funds are flocking to. The reason is simple: our research has shown that we can outperform the market by imitating the best stocks of the best hedge funds. As part of our quarterly newsletter strategy, we select 14 small- and large-cap stocks every quarter, and since May 2014, we have returned 275%, beating the benchmark by 150 percentage points (see more details here).

The 7 best cheap stocks to buy, according to billionaire Ray Dalio

7) Mondelez International, Inc. (NASDAQ:MDLZ)

Value of Bridgewater Associates shares: $130,752,392

Number of hedge fund holders: 47

Forward P/E as of October 4: 19.76x

Mondelez International, Inc. (NASDAQ:MDLZ) produces, markets and sells snacks and beverages in Latin America, North America, Asia, the Middle East, Africa and Europe.

Long-term development of Mondelez International, Inc. (NASDAQ:MDLZ) should continue to be driven by its significant category offerings, strong brand reputation among households, and international reach. Wall Street believes the company remains well-positioned for long-term growth thanks to effective cost management strategies and effective pricing execution. Additionally, Mondelez International, Inc. (NASDAQ:MDLZ) announced a strategic partnership with Lotus Bakeries and BISCOFF to co-brand chocolate products and expand its biscuits business in India.

Mondelez International, Inc. (NASDAQ:MDLZ) continues to focus on increasing sales and market share through strategic promotions and increased distribution. The company continues to expect a strong second half, with positive volume growth in Europe and the cookie category in the US. The company continues to invest in its brands, expand distribution, pursue mergers and acquisitions, and scale sustainable snacks. Mondelez International, Inc. (NASDAQ:MDLZ) remains on track to achieve 90% of revenue in its core chocolate, cookies and baked snacks categories by 2030.

Mondelez International, Inc. (NASDAQ:MDLZ) announced that it has signed an agreement to acquire a significant majority stake in Evirth. This move reflects an important step forward in Mondelez International, Inc.’s strategy. (NASDAQ:MDLZ), which assumes accelerated growth in the cakes and pastries category. This category remains the company’s main focus, along with chocolate and cookies.

The Goldman Sachs Group has started covering the shares of Mondelez International, Inc. (NASDAQ:MDLZ) with a “Buy” rating and a $80.00 price target on 12^vol August. Carillon Tower Advisorsinvestment management company, published its investor letter from the first quarter of 2024. Here’s what the fund said:

“As a major chocolate producer, Mondelez International, Inc. (NASDAQ:MDLZ) saw its shares fall amid investor concerns over a dramatic increase in cocoa prices. Mondelez has safeguards in place, but the company will need to raise prices to offset rising costs, particularly in Europe. Consumers around the world are struggling with high cumulative inflation of products manufactured by the company. In many cases, consumers are purchasing smaller quantities.”

6) McKesson Corporation (NYSE:MCK)

Value of Bridgewater Associates shares: $150,253,051

Number of hedge fund holders: 70

Forward P/E ratio as of October 4: 15.06x

McKesson Corporation (NYSE:MCK) offers healthcare services in the United States and around the world. It operates in 4 segments: US Pharmaceutical, Prescription Technology Solutions (RxTS), Medical-Surgical Solutions and International.

McKesson Corporation’s (NYSE:MCK) sustainable competitive advantages and entry barriers resulting from economies of scale and demand advantages continue to underpin its long-term growth trajectory. In the first quarter of 2025, the company’s US Pharmaceutical segment saw growth, primarily in oncology and specialty applications. McKesson Corporation (NYSE:MCK) continues to focus on improving patient access, affordability and medication adherence through technology-enabled solutions.

While the company’s U.S. oncology network includes more than 600 locations, McKesson Corporation (NYSE:MCK) has plans for further expansion. The company continues to integrate various oncology resources in an effort to create a more coordinated and efficient ecosystem. Its strategic initiatives focused on streamlining operations and growing its U.S. oncology network bode well for the company in 2025.

McKesson Corporation (NYSE:MCK) raised its 2025 adjusted EPS guidance to $31.75-$32.55, expecting revenue growth of 13-15% and operating profit growth of 10-15%. The company announced that it has signed a definitive agreement to acquire a controlling interest in Community Oncology Revitalization Enterprise Ventures, LLC (Core Ventures). Upon completion, Core Ventures will become part of the Oncology platform. By expanding its oncology platform, McKesson Corporation (NYSE:MCK) plans to provide patients with advanced treatments and better care while lowering the overall cost of care.

Barclays increased their price target on McKesson Corporation (NYSE:MCK) from $596.00 to $616.00 with an Overweight rating of 8^vol August. Aluvium Asset Management, an asset management company, published its investor letter for the second quarter of 2024. Here’s what the fund said:

“McKesson Corporation (NYSE:MCK), a drug distributor, rose 8.9%. In our March report (after we presented profits for the third quarter and our profit was 16.1%), we wrote that we would postpone the update until the publication of the result for the whole year and that we expected an increase in our valuation. And it did – our “owner earnings” estimate increased by a low double-digit amount and our valuation increased by 15%. Although it trades at a premium of 13% to this valuation, we are fully aware of our conservatism and feel comfortable maintaining our position at 7.1%.