Forget About Billionaire Ray Dalio’s Recent GameStop Buy 

  • Bridgewater Associates reported in its latest 13F that it bought GameStop (GME). 
  • Meme stock investors want to believe this is a sign that GME stock is a righteous buy. 
  • However, you should ignore what hedge fund billionaires are buying.
A Gamestop video game store in the Herald Square shopping district in New York

Source: rblfmr / Shutterstock.com

Like the shot heard round the world, the news that billionaire Ray Dalio’s Bridgewater Associates bought some GameStop (NYSE:GME) in the first quarter put some jump in GME stock.

On May 13, Bridgewater filed its Q1 2022 13F. It showed that amongst its 968 positions was a small stake in GameStop, the meme stock of champions. So naturally, business media made a big deal about Dalio’s latest dalliance with GameStop. For context, in 2018, the billionaire’s fund owned 3.1 million shares of the video game retailer.  

The reality is that Dalio’s purchase of GameStop is nothing more than filler for Bridgewater’s $25 billion investment portfolio. This is not a reason to buy GME stock. Here’s why.

GME GameStop $95.66

GME Stock Is Dalio’s 848th Largest Position

Bridgewater owned 4,136 shares of GameStop at the end of March. At its May 19 price, the position is worth $378,030. At the end of the first quarter, they were worth $689,000, almost double.

In mid-March, GameStop shares traded even lower than it is today, around $78 a piece. By March 28, it was at nearly $190 per share. Bridgewater likely bought near the low and sold near the high.

Do you really believe when Bridgewater reports its Q2 2022 holdings in July, it will still be holding these shares? Not a chance. As I said before, GME stock was filler. 

My InvestorPlace colleague, Chris MacDonald, recently argued the purchase by Dalio was a reason to buy GME stock. He could also make the same case for AMC Entertainment (NYSE:AMC), given Bridgewater’s 13F showed it owned 27,066 shares in America’s largest movie theater operator. 

MacDonald makes an interesting argument, suggesting Dalio’s buy of these two stocks signaled the firm’s belief that markets would head higher in April and May. If that’s the case, Dalio bet wrong. It’s been nothing but pain for the S&P 500, down 14% since the beginning of April.

In other words, don’t read the tea leaves — you’ll get burnt.   

The New COO Hire Is a Head Scratcher

On May 16, GameStop stock lost 6% on the announcement it hired former Belk CEO Nir Patel as its COO. That’s not a good sign. 

GameStop took six months to find what can only be described as an underwhelming choice. It suggests its largest shareholder wanted a yes-man or -woman in that role. Former COO Jenna Owens stepped down in October 2021 after just seven months. 

There is no question the former Belk CEO has worked in many different roles at several high profile retailers — Target (NYSE:TGT) and Kohl’s (NYSE:KSS) are two examples. But his hiring is not what I’d expect from a turnaround strategy that’s focused on e-commerce and a non-fungible token (NFT) marketplace.

This lack of a strategy is why former Nintendo of America (OTCMKTS:NTDOY) CEO Reggie Fils-Aimé stepped down from GameStop’s board after a year. Patel’s hiring is indeed a head-scratcher.

Focus on the Fundamentals With GME Stock

I would argue investors interested in buying GME stock should focus on the company’s fundamentals and not on which billionaires are buying it. I would also suggest the hiring of Patel as COO says the possibility Ryan Cohen doesn’t have a legitimate turnaround strategy is higher today than it’s ever been.

As for Bridgewater’s portfolio, it has 41 stocks whose positions were worth $100 million or more at the end of March. So if you’re going to bet based on the billionaire’s buys, the least you can do is choose ones in which it’s invested real money on the outcome.

Dalio’s investment in GameStop is meaningless — and it’s certainly not a reason to buy GME stock.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.


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