Ray Dalio was the hedge fund world’s most successful investor in 2010 and 2011, with his $120 billion Bridgewater Associates LP. His firm invests based on his understanding of macroeconomic principles.
In his second-quarter letter , Dalio said he believed global equity markets were pricing in “fairly pessimistic” long-term earnings growth rates and the worst real earnings growth rate in 100 years, while companies still “retain plenty of ability to protect their operating margins and profitability by keeping labor costs down,” despite global financial conditions posing a headwind to top-line revenue growth. He also noted that the dividend yield of U.S. non-financial corporation is higher than U.S. government note yields for only the second time in the past 50 years, and companies had ample liquidity to cover their dividends.
Analyzed by GuruForce, these are Dalio’s biggest new stock purchases in the second quarter…
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Bloomberg’s Lynn Thomasson and Rita Nazareth report that Chinese stock valuations have tumbled to a record low compared with Hong Kong, a sign to investors that mainland equities are poised to rally even as the government cracks down on inflation.
The MSCI China Index’s 9.2 percent slump since November has left it trading at 11.7 times estimated profit for 2011, data compiled by Bloomberg show. The MSCI Hong Kong Index rallied 26 percent between July and December, beating China shares by the most in nine years and pushing its valuation to 17.5 times earnings, the highest ever compared with shares on the mainland.
Prudential Financial Inc. and USAA Investment Management Co. say the gap will close because economic growth may average 9.6 percent over the next two years, double the global figure in International Monetary Fund data. Premium valuations in Hong Kong, the route to China for most investors, signal that seven increases in bank reserves and two interest rate boosts by Wen Jiabao’s government since 2010 won’t derail growth, they say.
“Things will be all right even as China takes steps to tighten,” said John Praveen, the Newark, New Jersey-based chief investment strategist at Prudential International Investments Advisers, which oversees $750 billion. “Chinese growth will still be good.”
The global recovery is boosting demand for Chinese goods even as the nation takes steps to cool expansion in what likely became the world’s second-largest economy last year. China exported $283.3 billion to the U.S. in 2010, according to customs bureau figures released on Jan. 10. Gross domestic product in the U.S. grew at a 3.2 percent annual rate in the fourth quarter, up from 2.6 percent during the previous three months, the Commerce Department said Jan. 28.
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