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Hedge Funds Aren’t Crazy About Baidu, Inc. (BIDU) Anymore

Abigail Fisher

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of March 31st, 2020. What do these smart investors think about Baidu, Inc. (NASDAQ:BIDU)?

Baidu, Inc. (NASDAQ:BIDU) has seen a decrease in hedge fund sentiment in recent months. Our calculations also showed that BIDU isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 44 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

[caption id="attachment_30614" align="aligncenter" width="399"] Howard Marks of Oaktree Capital Management[/caption]

Howard Marks OAKTREE CAPITAL MANAGEMENT

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. Also, Europe is set to become the world’s largest cannabis market, so we checked out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's take a gander at the recent hedge fund action regarding Baidu, Inc. (NASDAQ:BIDU).

How are hedge funds trading Baidu, Inc. (NASDAQ:BIDU)?

Heading into the second quarter of 2020, a total of 49 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BIDU over the last 18 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, holds the largest position in Baidu, Inc. (NASDAQ:BIDU). Renaissance Technologies has a $575.5 million position in the stock, comprising 0.6% of its 13F portfolio. Sitting at the No. 2 spot is Ariel Investments, led by John W. Rogers, holding a $215.8 million position; the fund has 3.8% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions contain Robert Rodriguez and Steven Romick's First Pacific Advisors LLC, Ken Fisher's Fisher Asset Management and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Hidden Lake Asset Management allocated the biggest weight to Baidu, Inc. (NASDAQ:BIDU), around 17.48% of its 13F portfolio. Yiheng Capital is also relatively very bullish on the stock, earmarking 4.21 percent of its 13F equity portfolio to BIDU.

Judging by the fact that Baidu, Inc. (NASDAQ:BIDU) has faced bearish sentiment from the smart money, it's easy to see that there were a few fund managers that slashed their full holdings last quarter. Intriguingly, Brandon Haley's Holocene Advisors sold off the largest stake of the "upper crust" of funds tracked by Insider Monkey, comprising close to $135.8 million in stock. John Overdeck and David Siegel's fund, Two Sigma Advisors, also said goodbye to its stock, about $83.4 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 11 funds last quarter.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Baidu, Inc. (NASDAQ:BIDU) but similarly valued. These stocks are Infosys Limited (NYSE:INFY), Public Storage (NYSE:PSA), Autodesk, Inc. (NASDAQ:ADSK), and Keurig Dr Pepper Inc. (NYSE:KDP). This group of stocks' market values match BIDU's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position INFY,27,970629,2 PSA,27,807200,0 ADSK,65,2597838,1 KDP,30,564764,4 Average,37.25,1235108,1.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.25 hedge funds with bullish positions and the average amount invested in these stocks was $1235 million. That figure was $2235 million in BIDU's case. Autodesk, Inc. (NASDAQ:ADSK) is the most popular stock in this table. On the other hand Infosys Limited (NYSE:INFY) is the least popular one with only 27 bullish hedge fund positions. Baidu, Inc. (NASDAQ:BIDU) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but beat the market by 15.6 percentage points. Unfortunately BIDU wasn't nearly as popular as these 10 stocks and hedge funds that were betting on BIDU were disappointed as the stock returned 2.5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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Disclosure: None. This article was originally published at Insider Monkey.

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