Bridgewater’s shorts screened, seriously bold
We could not resist screening the Bridgewater Dalio’s $22bn short bet on European equities as trumpeted in the media on 15 February. AlphaValue covers 51 of the 60 stocks or about $21.5bn of the exposure (see bottom list).
The bet is a bold one as that portfolio when injected in the AlphaValue screener offers a 15% upside compared to 9% for the 470 strong European coverage universe of AlphaValue.
The bet is on highly-liquid assets and thus quality ones. The least-liquid company in the AV coverage is Prysmian which still trades at €25m a day on average.
The quality profile of the selection is further confirmed by the weighted 2018 yield of this universe at 4% vs. 3.6% for the market. From a credit rating standpoint, there is pretty much no dog in that selection of 51 names. Even the list’s governance ratings are above average.
Sector-wise, 19.5% of that short effort will be Bank-focused. This is twice the weight of the sector. We hold the view that the sector is bound to do relatively well due to its dividend payment acceleration.
The other surprise is that this short bet is little exposed to Pharmas (7% of holdings) through only Sanofi and Bayer. Pharmas weigh about 9% of the index. Throwing in the exposure to Health stocks (Fresenius) provides for a better balance though.
Eurozone short indeed
French stocks account for 25% of the total, German ones for 34%, and Italian ones for c. 16%. Unilever has been regarded as Dutch for the occasion.
We also compute that the exposure of the list’s revenues to the US$ is 30%. After allowing for the costs in $, the net exposure is c. 10% only. So that this list may not underperform on a $ weakness anyway.
In all, that short with a macro anti-euro rationale looks strangely tilted towards quality names and thus bold. The current strength of the euro makes it even bolder if Bridgewater records its gains in dollars.
Founded in 2007, AlphaValue has become the world’s leading provider of Independent European Equity and Credit Research. We provide comprehensive, unconflicted research-only (no execution) coverage of c. 480 European mid and large cap stocks. We have an average of 46% of negative recommendations at any one time. Learn more at www.alphavalue.com