Top 10 Technology Stocks to Buy in 2023 According to Ray Dalio
In this article, we discuss the top 10 technology stocks to buy in 2023, according to Ray Dalio. If you want to skip our detailed analysis of Dalio’s investment philosophy and portfolio construction, go directly to the Top 5 Technology Stocks to Buy in 2023, According to Ray Dalio.
Billionaire Ray Dalio argued in a recent interview on the Julia La Roche Show that global central banks are less willing to hold the US dollar for two reasons. First, the greenback has serious competition for the first time in many decades from the Chinese yuan. He noted that China's share of global trade is ascendant while the US share is shrinking. Most importantly, China is promoting trading agreements centered on its currency rather than the dollar, which has been the norm for a long time. Secondly, Western sanctions against Russia and several other countries have exposed new risks for holding dollar-denominated assets. For instance, the US and its allies froze Russia's assets, with the US Fed freezing currency reserves. To Dalio, the action was not only high-handed but spooky to global central banks that hold dollar-denominated currency reserves.
Last year, Dalio said during CNBC's Squawk Box interview that investors are better off not keeping cash because inflation had reached dangerous levels. Instead, he argued that putting the money in a well-balanced portfolio was safe. He also spent time discussing his latest book, "The Changing World Order," in which he shares valuable insights on the current geopolitical and economic cycles.
Dalio has made bullish comments on China's tech sector, arguing that it is vibrant and poised to challenge the United States. At home, Dalio was among the loudest speakers regarding the possibility of a tech stock bubble pre-2021. He said in an interview in early 2022 that the Fed's rate hikes would hit hard the 'bubble-type' tech stocks. His thoughts were prescient because several tech stocks lost significant value in 2022 after the Fed's sustained campaign of rate hikes.
Ray Dalio of Bridgewater Associates
Our Methodology
We picked top 10 tech stocks from Bridgewater Associates' 13F portfolio as of the end of the fourth quarter of 2022. Although the billionaire retired from Bridgewater, he remains a mentor, board member and investor at the firm.
Top Technology Stocks to Buy in 2023 According to Ray Dalio
10. Netflix, Inc. (NASDAQ:NFLX)
Value of Bridgewater Associates’ 13F Position: $24.89 million
Percentage of Bridgewater Associates’ 13F Portfolio: 0.13%
Number of Hedge Fund Shareholders: 117
Netflix, Inc. (NASDAQ:NFLX) provides streaming entertainment services, including TV series, movies, documentaries, and mobile games in multiple languages and genres, available on various internet-connected devices. The company has around 231 million paid subscribers across 190 countries.
On April 18, Credit Suisse analyst Douglas Mitchelson raised his price objective on Netflix, Inc. (NASDAQ:NFLX) to $331 from $291 and retained a ‘Neutral’ rating before Q1 earnings report. Credit Suisse predicted positive investor feedback on Netflix's Q1 earnings with increased revenue and margin improvement but anticipated management's caution on Q2 subscriber numbers due to potential password-sharing launches and seasonal effects.
Bridgewater Associates owns 84,422 shares in Netflix, Inc. (NASDAQ:NFLX), valued at more than $24.89 million, which accounts for 0.13% of the hedge fund's portfolio. The hedge fund has boosted its stake in the firm by an impressive 101% in the fourth quarter of 2022.
Out of the hedge funds tracked by Insider Monkey, 117 hedge funds were long Netflix, Inc. (NASDAQ:NFLX) during the fourth quarter with aggregate stakes worth $8.15 billion. This compares to 115 hedge funds holding $6.66 billion in Netflix, Inc. (NASDAQ:NFLX) in the previous quarter.
Like Baidu, Inc. (NASDAQ:BIDU), Apple, Inc. (NASDAQ:AAPL), and Meta Platforms, Inc. (NASDAQ:FB), Netflix, Inc. (NASDAQ:NFLX) is one of the tech stocks on the radar of Ray Dalio.
In its Q4 2022 investor letter, Broyhill Asset Management stated the following about Netflix, Inc. (NASDAQ:NFLX):
“Speaking of fresh names, we established a new position in Netflix, Inc. (NASDAQ:NFLX) during the second half. We began accumulating shares after the company reported two consecutive quarters of subscriber losses, which brought the stock down by about 75% from peak to trough. Our investment in Netflix is a good example of what we categorize as a “temporary dislocation” and a great example of the historical investments we’ve made in the tech sector. Unlike other “value” investors, we don’t arbitrarily put tech in the “too hard” pile. We are comfortable and more than happy to underwrite investments in the industry. We just demand a margin of safety when doing it (something often ignored by other investors in the industry). That margin of safety opened up when consensus quickly concluded that Netflix’s growth was over, on the heels of two quarters of subscriber losses, which happened to follow years of surging lock-down-induced demand. The popular narrative was that by pursuing advertising revenue, Netflix was all but admitting that streaming television was completely saturated. We thought otherwise. With ~ 75MM subscribers in the US, even converting a small portion of those 100MM moochers would move the needle3. And given the superiority of the company’s technology and first-party user data, we think the consensus is completely underestimating the long-term potential of a Netflix advertising model.”
9. International Business Machines Corporation (NYSE:IBM)
Value of Bridgewater Associates’ 13F Position: $28.67 million
Percentage of Bridgewater Associates’ 13F Portfolio: 0.15%
Number of Hedge Fund Shareholders: 43
International Business Machines Corporation (NYSE:IBM) provides integrated solutions and services globally, operating through four business segments: Software, Consulting, Infrastructure, and Financing, offering hybrid cloud platform and software solutions, business transformation and technology consulting services, server and storage solutions, and financing services.
Securities filings reveal that Bridgewater Associates boosted its stake in International Business Machines Corporation (NYSE:IBM) by 8% during the fourth quarter of 2022. The fund presently owns 203,464 shares of the company worth over $28.67 million, representing 0.15% of the portfolio.
Credit Suisse analyst Shannon Cross lowered International Business Machines Corporation (NYSE:IBM)'s price target to $162 from $165 and maintained an 'Outperform' rating ahead of the Q1 earnings report on April 19, citing that IBM's regular software revenue and AI assets made it more protected than other companies in the case of a possible economic downturn.
As of the fourth quarter of 2022, 43 hedge funds in Insider Monkey’s database held stakes in International Business Machines Corporation (NYSE:IBM). The most prominent shareholder in International Business Machines Corporation (NYSE:IBM) is Adage Capital Management, with 919,590 shares valued at $129.56 million.
In its Q4 2022 investor letter, Diamond Hill Capital stated the following about International Business Machines Corporation (NYSE:IBM):
“New positions initiated in Q4 included shorts International Business Machines Corporation (NYSE:IBM), Acushnet Holdings (GOLF) and elf Beauty (ELF). Since diversified information technology company IBM’s 2019 acquisition of Red Hat, the company has aggressively pursued a hybrid cloud strategy. Though IBM and its new management team have made solid progress on this pivot, we believe the company still meaningfully lags the cloud hyperscalers and other cloud-native companies. Management has also laid out aggressive long-term targets for revenue growth and free cash flow, both of which we believe the company will struggle to achieve as it faces intense competition in its hybrid cloud business and structural headwinds in the company’s legacy businesses.”
8. Kanzhun Limited (NASDAQ:BZ)
Value of Bridgewater Associates’ 13F Position: $28.97 million
Percentage of Bridgewater Associates’ 13F Portfolio: 0.15%
Number of Hedge Fund Shareholders: 23
Kanzhun Limited (NASDAQ:BZ) runs BOSS Zhipin, an online job search platform that connects job seekers with employers. The company generates revenue by providing recruitment services to both job seekers and enterprise clients through its mobile apps and websites.
Barclays analyst Jiong Shao raised his price objective on Kanzhun Limited (NASDAQ:BZ) to $21 from $16 and maintained an ‘Equal Weight’ rating, noting strong Q1 trends with 25% YoY billing growth despite subdued Q4 results.
Bridgewater Associates started building its position in Kanzhun Limited (NASDAQ:BZ) in the fourth quarter of 2021. As of the fourth quarter of 2022, the hedge fund held 1.42 million shares worth $28.97 million. The company represents 0.15% of the hedge fund's 13F portfolio.
As of the end of the fourth quarter, there were 23 hedge funds in Insider Monkey’s database that held stakes in Kanzhun Limited (NASDAQ:BZ), compared to 19 funds in the third quarter. Tiger Global Management LLC, with 13.86 million shares, is the biggest stakeholder in the company.
7. KE Holdings Inc. (NYSE:BEKE)
Value of Bridgewater Associates’ 13F Position: $45.14 million
Percentage of Bridgewater Associates’ 13F Portfolio: 0.24%
Number of Hedge Fund Shareholders: 39
KE Holdings Inc. (NYSE:BEKE) is a Chinese company that provides an integrated online and offline platform for housing transactions and services, including existing and new home sales, home rentals, home renovation, furnishing, and related services. KE Holdings Inc. (NYSE:BEKE) operates in three segments and owns Lianjia, a real estate brokerage store, and a franchise model for connected brokerage stores called Deyou. KE Holdings is based in Beijing, China.
On April 7, JPMorgan's Alex Yao raised his price target on KE Holdings Inc. (NYSE:BEKE)’s to $23.50 from $23 and maintained an ‘Overweight’ rating. According to JPMorgan, KE Holdings Inc. (NYSE:BEKE) surpassed the China internet sector in the past year, buoyed by upbeat earnings revisions and a re-rating from investors. The firm had expected this trend to persist with further earnings upgrades.
6. Cisco Systems, Inc. (NASDAQ:CSCO)
Value of Bridgewater Associates’ 13F Position: $48.54 million
Percentage of Bridgewater Associates’ 13F Portfolio: 0.26%
Number of Hedge Fund Shareholders: 70
Cisco Systems, Inc. (NASDAQ:CSCO) designs, manufactures, and sells networking and IT products globally, including switching, routing, wireless, and computing solutions. They also offer Internet for the future, collaboration, security, optimized application experiences products, and customer support services. Cisco Systems, Inc. (NASDAQ:CSCO) serves various organizations directly or through partners and has strategic alliances with other companies.
Goldman Sachs rated Cisco Systems, Inc. (NASDAQ:CSCO) ‘Neutral’ on March 6, stating a preference for networking equipment stocks that would benefit from cloud service provider data center investments and enterprise digital transformation spending. They also cited earnings visibility and attractive valuation compared to peers.
Bridgewater Associates loaded up on California-based tech company Cisco Systems, Inc. (NASDAQ:CSCO) in the fourth quarter, increasing its hold on the company by 4%. The hedge fund owns 1.02 million shares of the company, worth $48.54 million.
In the fourth quarter of 2022, 70 hedge funds had stakes worth $3.03 billion in Cisco Systems, Inc. (NASDAQ:CSCO), up from 68 in the preceding quarter worth $2.79 billion. The most prominent shareholder in Cisco Systems, Inc. (NASDAQ:CSCO) is Two Sigma Advisors.
Along with Baidu, Inc. (NASDAQ:BIDU), Apple, Inc. (NASDAQ:AAPL), and Meta Platforms, Inc. (NASDAQ:FB), Cisco Systems, Inc. (NASDAQ:CSCO) is one of the tech stocks that Bridgewater Associates is monitoring.
In its Q4 2022 investor letter, Artisan Partners stated the following about Cisco Systems, Inc. (NASDAQ:CSCO):
“We had one sale this quarter, exiting network equipment company Cisco Systems, Inc. (NASDAQ:CSCO). We chose to use the proceeds on more attractive value opportunities as Cisco’s growth has come in below what we had hoped for, and the company is increasingly looking at M&A to augment its growth rate.”
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Disclosure: None. Top 10 Technology Stocks to Buy in 2023 According to Ray Dalio is originally published on Insider Monkey.