So far in 2022, the S&P 500 index (SPX) has dropped 21.5% and the Dow Jones Industrial Average (DJIA) is down 16.5%. Although the markets are just entering bear territory, the latest moves by one of the biggest names on Wall Street, Ray Dalio, indicate that the correction may extend further.
With nearly 26 short positions, Dalio’s Bridgewater Associates has now become the largest short position holder on European stocks. Bridgewater has upped its total shorts by nearly 5x, to around $9.5 billion.
Bridgewater’s largest bet, at $1 billion, is against semiconductor provider ASML (ASML), followed by a nearly $750 million short position against TotalEnergies (TTE). These moves could either be a bet on the market slumping further or part of a hedging strategy.
The billionaire investor, who is known for saying ‘cash is trash,’ recently commented that he is looking for assets that can shield against inflation and that he is avoiding regions that could be in the midst of geopolitical whirlwinds.
Other names on Bridgwater’s short list include Bayer (BAYN), Allianz (ALIZY), Santander (SAN), and BASF SE (BAS). Moreover, the hedge fund has also initiated new short positions in SAP (SAP), Siemens (SIE), and Adidas (ADS).
Bridgewater may have more short positions, which remain undisclosed as regulations stipulate disclosure of short positions that are at least 0.5% of a company’s issued stock.
Rising interest rates, high inflation, and the Russia-Ukraine conflict have been amplifying fears of a possible recession that have been affecting investor sentiment.
ASML
TipRanks data indicates that the Street has a Moderate Buy consensus rating on ASML with an average price target of $686.67, implying 38.9% potential upside. Shares of the Netherlands-based semiconductor equipment provider are already down 38% this year.
TotalEnergies
Shares of oil and gas company TotalEnergies have fared better in the current market turmoil and are still up 4.3% so far in 2022. The Street has a Moderate Buy consensus rating on TTE as well, alongside an average price target of $64, implying 20.3% upside potential.
Closing Note
Bridgewater is known for taking massive bets against stocks, with its last large short positions held around the COVID-19 pandemic. How its latest maneuvers will pan out remains to be seen.