Insider Buying

Ray Dalio’s Bridgewater Associates bet against European stocks

Most companies picked up their pace and saw their stock prices hiking in 2021, a welcome change post the pandemic. But in 2022 most saw their stock prices going in a downward spiral due to multiple reasons in the world climate. One of these reasons was Russia’s invasion of Ukraine in Feb’22. 

Protesting against the invasion, several businesses halted operations in the country. Countries chose to stop importing Russian fuel, which even now is one of biggest producers and suppliers of petroleum in the world. Both US and European markets took blows, resulting in worldwide inflation. Now, recession is what’s looming around the corner. 

In a recent article on Linkedin about the rising inflation, billionaire investor, Ray Dalio provided his input. He said that reducing inflation will come with a heavy cost to the US, and will most likely result in stagflation.

Bridgewater's moves

Founded in 1975 by Dalio, Bridgewater Associates LP is a global investment management firm. Today, it is referred to as the largest hedge fund in the world and Dalio currently serves on as Co-CIO as well as a Board member. 

Disclosed throughout June’22, Bridgewater shorted several European stocks across multiple sectors. 2iQ analysts have covered these stocks in the past and found 25 companies against which Bridgewater holds short positions. Interestingly, all of these are listed on the Euro Stoxx 50.

The highest count of companies was from the Financial sector, where Bridgewater shorted eight companies. Coming in second, the firm held positions in four companies each from the IT and Industrial sectors. Other sectors which the firm dabbled in included Materials, Healthcare, Energy, Real Estate among others.

Information Technology 

Although this sector only had four companies, the total value of shares on the respective dates of short position was €2.09 billion. This was the highest value number for all sectors. By June 21, this number increased to €2.16 billion. 

Bridgewater betted against three of these companies - ASML Holding NV (ASML: NA), Infineon Technologies AG (IFX: GR), and Sap Se (SAP: GR) - on June 17.

With a short position of 0.63%, ASML’s shorted shares valued at almost €1.18 billion according to ASML’s price on June 21. Value-wise, this makes ASML Holding as the company with the highest value of shorted stocks.

Financials

On the position date, data showed that the firm had betted almost €1.78 billion against eight financial companies. As of June 21, that number rose to €1.82 billion. For all these companies, the number of short positions remained the same comparing the date of announcement with the present date. 

Among these was Banco Santander SA (SAN: SM), which has 0.63% of shares outstanding. Shorted on June 17, the current total value of SAN’s shorted shares is approx. €299.7 million. 

The highest value of shorted shares belonged to German company, Allianz Se (ALZ: GR), which had almost €468.9 million worth of shorted stocks.

Industrials

On June 15 and 17, the third highest values were of four companies in the Industrials sector. The shares’ worth of position date was €1.38 billion and now the value is at €1.37 billion. 

The highest short position - 0.62% - is against Schneider Electric SA (SU: LI) and Vinci SA (DG: FP). Schneider’s shorted shares amount to a current value of approx. €401.8 million. 

Another company was Siemens AG (ENR: GR), against which the firm had a short position of 0.51%. The value of shorted shares of the company was approx. €471 million. The number later decreased to nearly €444 million on the coming Monday. 

Other Sectors

Issuers from other sectors which Bridgewater shorted amounted to almost €3.30 billion worth of shorted shares. The short position of all these nine companies remained unchanged, except Adidas AG (ADS: GR). On June 15, Bridgewater held a 0.52% short position against the company. This number soared to 1.61% on June 21. The value of shorted ADS shares is at €165.7 million. 

To Conclude

The Euro Stoxx 50, which has all of these companies listed on its index, faced a price decline of almost 20.72% year to date. Around the same time as the betting started, some individuals pointed out that he was right to short European stocks. One such individual is Beat Wittman, partner at Porta Advisors.

On June 16, Bridgewater was named the largest short-seller of European stocks. As of June 21, Dalio’s firm is betting almost €8.64 billion against 25 issuers. Some comment whether more companies from the Euro Stoxx 50 will join this list. Lastly, it’s unclear whether these bets were to profit from the stocks but a part of a much bigger hedging strategy.

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