For many, competing in the Olympics is the pinnacle of athletic achievement, and it takes years of sweat, toil, and sacrifice to get there but, it is child’s play in comparison to dealing with the stock market.
That is, at least, the perspective of Ray Dalio, the billionaire Founder of Bridgewater Associates, the world’s largest hedge fund.
Dalio recently compared the stock market to poker, saying that “someone is going to take money away from somebody else.” Portfolios are likewise similar to casinos in that you win some and lose some.
Dalio has done a lot of winning in the stock market, and while he is no longer the firm’s Co-Chief Investment Officer, having resigned from that position in October, he remains on the Bridgewater Associates board.
Meanwhile, the hedge fund has been betting on two stocks, believing that the chances are stacked in their favor.
Analysts on Wall Street clearly agree; according to analysts, both are rated as Strong Buys by the analyst consensus.
Let’s look at what makes them good portfolio additions right now.
Planet Labs, a business whose goal is to revolutionize space photography, is the first stock Bridgewater has been buying up on.
In other words, it was founded with the goal of offering worldwide satellite imagery and geospatial solutions.
Planet Labs creates and controls the world’s biggest fleet of imaging satellites, with over 200 satellite cameras in orbit, and collects data from over 3 million photographs every day.
The company provides enhanced analytics, imaging, and software for use in agriculture, government, security, and a variety of other industries.
Planet Labs is a newcomer to the stock market, having gone public via the SPAC method at the end of 2021.
In its most recent quarterly report, the firm reported record revenue of $49.7 million, representing a 56.8% year-over-year rise and topping the Street’s estimate by $2.51 million.
The bottom line also improved, with adj. EPS of -$0.08 beating the -$0.11 expectation.
The company expects sales in the range of $50 million to $54 million in Q4, indicating a 40% year-over-year increase at the midpoint.
Bridgewater has seen the potential here.
The hedge fund purchased 1,499,078 shares of Planet Labs during the fourth quarter. These are currently worth approximately $7 million.
Analyst Ratings for PL
Wedbush analyst Daniel Ives is also a fan, and believes that beyond supplying photos, more value can be found elsewhere.
“Management is seeking to position the company to also give data and effectively be a back-end provider for industries that need satellite imaging data,” added the 5-star Analyst. “With this economic model, organizations can successfully collaborate with Planet or even start as an own company on top of Planet’s data, offering a significant growing opportunity for the name because Planet owns the data. As the demand for precise satellite imagery grows, we see a significant opportunity for Planet to capitalize on this massive addressable market.”
To that end, Ives rates PL as an Outperform (Buy) with a $8 price objective, implying that shares would rise 71% in the coming year.
What does the rest of the street think? Over the last three months, four buys and one hold have been issued.
As a result, the consensus rating for PL is Strong Buy. Shares might rise 79% in the next year based on the $8.40 average price objective.
Schlumberger Limited (SLB)
Schlumberger, a major provider of oilfield services, is the next company we’ll look at.
In reality, it is the world’s largest offshore drilling company, offering oilfield equipment and services to the worldwide oil and gas industry.
Schlumberger’s services include data processing, oil well testing, site appraisal, drilling, and hoisting activities in over 120 countries.
In addition, the firm provides management and consulting services.
Schlumberger released its fourth-quarter financial results in January, and they were outstanding.
Sales increased by 26.5% year on year to $7.9 billion, outperforming the Street’s forecast by $110 million. Adj. EPS of $0.71 was up 76% over the same time last year, and outperformed analysts’ expectations of $0.68.
Q4 cash flow from operations was $1.6 billion, while free cash flow was around $900 million.
Of course, oil stocks were among the few to benefit from last year’s terrible market, as was Schlumberger, which gained 78% during the year.
Bridgewater clearly believes there is more space for improvement.
The hedge fund increased its holdings by 74% in Q4 by purchasing 272,080 shares.
The fund now owns 644,781 SLB shares, which are presently valued more than $33.7 million.
Analyst Ratings for SLB
Barclays analyst David Anderson, who considers SLB a ‘High Pick,’ also paints a positive picture.
“With another strong quarter, SLB once again delivered a compelling investment thesis to investors – not only for its own shares, but for the whole Energy Services industry. By any measure, 2022 was one of SLB’s best years in a decade, but with the cycle entering a new growth phase, visibility on growth and margin expansion now stretches beyond 2025 (possibly much beyond, depending on the cycle)” Anderson said on a statement.
“At this stage,” the analyst continued, “It’s difficult to find flaws in the story or the future, especially with the Middle East and offshore cycles working in SLB’s favor. Furthermore, with the only real bear case for SLB (apart from being heavily held), increased clarity on the cycle’s duration adds another leg of upside potential to the stock.“
In keeping with this assessment of SLB’s capabilities, Anderson rates the company as Overweight (i.e. Buy), with a price objective of $74 representing a 41% 12-month upside.
With the exception of one skeptic, all 11 recent analyst ratings are positive, resulting in a Strong Buy consensus.
The average target price of $67.45 means that investors can expect 29% annual gains. In addition, the company pays out regular dividends, which now yield 1.87%.
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