Raymond Dalio headed hedge fund giants ‘Bridgewater Associates’ revealed this Wednesday that it has been reducing its holding in Apple (NASDAQ:AAPL) gradually in favor of Microsoft (NASDAQ:MSFT). At the same time Bridgewater also revealed that it was parked its funds in Microsoft’s shares. This reduction-exercise has now resulted in Bridgewater’s holdings in Apple reduced to nearly half the figure of $28.6 million at the end of 2014 from the earlier figure of $53.9 million that existed at the end of the third quarter of 2014.
The liquidation of Bridgewater’s holdings in Apple freed up its funds for further investment in the shares of Microsoft. The direct fallout of this move has been that the increase in Microsoft’s holding by Bridgewater is now being seen as a shift in faith, in the technological future of the two companies, viz., Microsoft and Apple. Bridgewater’s holdings in Microsoft rose by multiple times from a measly $679,000 to a whopping figure of $27.9 million at the end of the year.
This sudden change in Bridgewater’s fund parking could perhaps be explained better by warnings from few analysts who have asserted their reservations in the Apple stock as a good investment decision. The analysts have based their observations and conclusions on Apple’s share that is trading at highly diluted earnings per share rates. Apple share despite being pricey is still trading 17 times lesser than the earnings per share value. Such trading at these rates of diluted EPS is a red-flag in the valuation of any tech hardware company.
However, Mr. Dalio, who is quite known for his data driven investment decisions may not reap the full advantage of this trade out, if one goes by the recent trends that haven’t yet indicated a favorable outlook on Bridgewater’s position in Microsoft. Ever since the trading out began, shares of Apple have been inching upwards, whereas the opposite is being seen in the case of the Microsoft’s shares.
This bold move to dump Apple’s stock in favor of Microsoft is not the first time that a strategic investment decision has been taken by large hedge-fund managers. Giant hedge funds generally have the financial power to muscle through a change in the stock market scenarios by voting with their wallets in favors or disfavor of any company listed on the exchanges.
This availability of financial votes empowers large hedge-funds to engineer change in stock markets when they achieve stagnation and start hurting the bottom lines of fund managers. Hence Bridgewater’s latest move must be seen in the light of generating a counter plot in the present stock market scheme of things.