The financial world witnessed the inception of the hedge fund giant, Bridgewater Associates, by the illustrious billionaire investor Ray Dalio back in 1975. Over the years, it has amassed a staggering $80 billion in assets under management (AUM), demonstrating its prowess by investing in over 740 different stocks, hence boasting a reputation for diversification.

This diversification signifies that no single position is likely to dominate a substantial portion of its portfolio. Despite Dalio’s step back from the day-to-day operations of Bridgewater in 2022, the hedge fund persists in adhering to the investment principles that the billionaire cultivated during his 47-year tenure.

Of the myriad holdings that Bridgewater Associates nurtures, two exchange-traded funds (ETFs) take center stage: the iShares Core S&P 500 ETF (NYSE:IVV) and the iShares Core MSCI Emerging Markets ETF (NYSE:IEMG). These ETFs account for 5.7% and 5.3%, respectively, of the fund’s entire portfolio, providing investors with a formidable foundation strategy to emulate.

While Dalio secures positions in the 500 most prominent U.S. companies and the finest stocks in emerging markets, he concurrently harnesses stability and growth through diversification across a spectrum of companies and geographies.

Yet, as a stock connoisseur, Mr. Dalio also maintains stakes in several individual companies. Among these, three stocks stand as Ray Dalio’s largest stock holdings.

The warehouse club giant, Costco (NASDAQ:COST), secures the third-largest spot, constituting 2.5% of the total ownership. As of the fourth quarter, Bridgewater held over 687,000 shares valued at $454 million. However, the hedge fund has been steadily reducing its stake as Costco’s stock price escalates. Just over a year ago, it commanded nearly a billion shares.

Initially, this might appear to be an ill-timed move. In 2023 alone, COST shares soared by 45%, implying that Bridgewater forfeited substantial profits. Yet, distinct from Warren Buffett, who typically adopts a buy-and-hold strategy, Dalio is unhesitant in seizing gains, a practice he refers to as “rotating the portfolio.” He capitalizes on gains from one stock to reinvest in others that lag behind the market.

Costco, a profit-generating juggernaut, has witnessed an 88% surge in earnings over the last five years, surpassing a tripling over the past decade. Trading at less than twice its sales, the company expects long-term earnings growth of approximately 10% annually. With preparations underway for heightening membership fees, an immediate revenue surge is on the horizon, promising a direct bottom-line augmentation.

Coca-Cola (NYSE:KO) assumes the position of the second-largest holding in the portfolio, constituting 2.6% of the overall ownership. Bridgewater boasts 8 million shares valued at $472 million. The hedge fund has exhibited minimal rotation of stock from this position, maintaining a reasonably consistent share count that fluctuates marginally each quarter.

Nevertheless, Coca-Cola didn’t deliver quite the robust performance witnessed at Costco. The beverage giant suffered a 7% drop in shares last year, though the stock has rebounded by almost 4% in 2024. Despite carbonated drinks continuing to dominate the company’s brand assortment, Coca-Cola strategically expanded into other non-soda categories. The corporation possesses over 500 non-alcoholic beverage brands, spanning water, juice, ready-to-drink teas, coffees, as well as energy and sports beverages.

Coca-Cola emerges as yet another cash-generating entity, concluding 2023 with nearly $10 billion in free cash flow (FCF). Investors frequently cherish Coca-Cola for its dividend stability and safety, currently boasting an annual yield of 3.1%. KO has consistently boosted dividends every year since 1967, a feat that defines it as a Dividend King.