For many, competing in the Olympics is the pinnacle of sporting achievement, and getting there takes years of sweat, toil and sacrifice. However, it’s child’s play compared to facing off in the stock market. That’s at least the opinion of Ray Dalio, the billionaire founder of the world’s largest hedge fund, Bridgewater Associates.
In a recent interview, Dalio has likened the stock market to poker, where “somebody’s going to take money away from somebody else.” Not only that, but portfolios are also similar to casinos, where you win some and lose some.
Dalio has done a lot of winning at the stock market game and although he might no longer be co-chief investment officer at the firm having left his role last October, he has kept a place on Bridgewater’s board.
Meanwhile, the hedge fund has been rolling the dice on a pair of stocks, believing the odds are stacked in their favor. Wall Street’s analysts evidently think so, too; according to the TipRanks database, both are rated as Strong Buys by the analyst consensus. Let’s see what makes them good additions to the portfolio right now.
Planet Labs PBC (PL)
The first stock Bridgewater has been loading up on is Planet Labs, a company whose target is to revolutionize space imaging. That is, it was established with the aim of providing global satellite imagery and geospatial solutions. Planet Labs develops and manages the largest observation fleet of imaging satellites – more than 200 satellite cameras are in orbit – and collects data from more than 3 million images every day. The company offers improved analytics, imagery, and software for applications in agriculture, government, security, and many other fields.
Planet Labs is relatively new to the stock market, having gone public at the end of 2021 via the SPAC route. In its latest quarterly report, for 3Q22, the company dialed in record revenue of $49.7 million, amounting to a 56.8% year-over-year increase and beating the Street’s call by $2.51 million. There was a beat on the bottom-line too, with adj. EPS of -$0.08 trumping the -$0.11 forecast. For Q4, the company anticipates revenue in the range between $50 million to $54 million, at the midpoint representing roughly a 40% year-over-year increase.
Bridgewater must sees big potential here. During Q4, the hedge fund opened a new position in Planet Labs, with the purchase of 1,499,078 shares. These are now worth about $7 million.
Wedbush analyst Daniel Ives is also a fan and beyond providing imagery, thinks additional value lies elsewhere.
“Management is looking to position the company to also provide data and effectively be a back-end supplier for companies needing satellite imaging data,” the 5-star analyst explained. “With this business model, companies can effectively partner with Planet or even launch on top of Planet’s data as an individual entity, creating a massive scaling opportunity for the name as Planet owns the data. Looking forward, we see a great opportunity for Planet to capitalize on this massive addressable market as the need for precise satellite imaging accelerates.”
To this end, Ives rates PL an Outperform (i.e. Buy), alongside an $8 price target, suggesting shares will climb ~71% higher in the year ahead. (To watch Ives’ track record, click here)
What does the rest of the Street have to say? 4 Buys and 1 Hold have been issued over the past three months. Therefore, PL gets a Strong Buy consensus rating. Based on the $8.40 average price target, shares could rise ~79% in the next year. (See PL stock forecast)
Schlumberger Limited (SLB)
The next stock we’re looking at is Schlumberger, a big player in oilfield services. In fact, it is the biggest offshore drilling company in the world, providing oilfield equipment and services for the global oil & gas industry. Located in over 120 countries, Schlumberger’s services include data processing, oil well testing, site appraisal, drilling and lifting operations. Additionally, the company offers management and consulting services.
Schlumberger reported its financial results for 4Q22 in January, and the results were impressive. Revenue grew by 26.5% year-over-year to $7.9 billion, while beating the Street’s call by $110 million. Adj. EPS of $0.71 was up by 76% from the same period a year ago and also fared better than the $0.68 anticipated by the analysts. Q4 cash flow from operations reached $1.6 billion while the company generated roughly $900 million in free cash flow.
Of course, energy stocks were of the few to benefit during last year’s bear and so did Schlumberger, gaining 78% over the course of the year. Bridgewater evidently thinks there’s more room to run. In Q4, the hedge fund bought 272,080 shares, increasing the stake by 74%. In total, the fund now holds 644,781 SLB shares, currently worth more than $33.7 million.
Also painting an upbeat picture is Barclays analyst David Anderson, who considers SLB a ‘Top Pick.’
“With another impressive quarter, SLB once again presented a compelling investment case to investors – not only for its own stock, but for the entire Energy Services sector. By every measure, 2022 was one of SLB’s finest years in a decade, but with the cycle entering a new growth phase, visibility on growth and margin expansion now extends beyond 2025 (potentially well beyond,” Anderson noted.
“At this point,” the analyst added, “it’s hard to find fault in either the story or the outlook, especially with the Middle East and offshore cycles playing into SLB’s strengths. And with the only real bear case for SLB (other than being well owned) being valuation, the increased visibility on the duration of the cycle provides another leg of upside potential to the stock.”
In line with this view of SLB’s strengths, Anderson rates the stock as Overweight (i.e. Buy), with a $74 price target implying a 12-month upside of ~41%. (To watch Anderson’s track record, click here)
Most on the Street concur; barring one skeptic, all 11 other recent analyst reviews are positive, making the consensus view here a Strong Buy. At $67.45, the average target implies investors will be sitting on returns of ~29% a year from now. As a bonus, the company pays regular dividends that currently yield 1.87%. (See Schlumberger stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
Source: https://finance.yahoo.com/news/worth-roll-dice-bridgewater-bets-004335522.html