4. Baidu, Inc. (NASDAQ:BIDU)
Number of Hedge Fund Shareholders: 43
As with Vipshop Holdings Limited (NYSE:VIPS), which ranked 9th on this list, Baidu, Inc. (NASDAQ:BIDU) also experienced a massive surge in hedge fund ownership during Q1 of 2021. That surge was as equally short-lived as Vipshop’s was, and two years later, Baidu has less than half the hedge fund shareholders that it did then.
Baidu, Inc. (NASDAQ:BIDU)’s growth has slowed in recent quarters, with revenue rising by just 10% year-over-year in Q1 to $4.54 billion. However, the company is becoming quite a bit more profitable as it improves its operational performance, with non-GAAP net income climbing by 48% year-over-year to $834 million, while non-GAAP diluted earnings per ADS grew by 43% to $2.34.
Horos Asset Management took advantage of weakness in Baidu, Inc. (NASDAQ:BIDU) shares to load up them, as it detailed in its Q4 2022 investor letter:
“As I mentioned at the beginning of this quarterly letter, we took advantage of the meltdown in technology platforms to initiate new positions in companies in which we had already been shareholders in the past and whose valuation did not, until now, provide a sufficiently high margin of safety. Such is the case of PayPal and Baidu, Inc. (NASDAQ:BIDU).
In the case of Baidu, as many will know, it is known as the “Chinese Google”. The company has been the leading Internet search engine in the Asian country for years, which has given it a historically privileged position to monetize, through online advertising, a huge user base. However, the rise of two types of applications has called into question the sustainability of its business model. On the one hand, mobile social apps, such as ByteDance’s well-known TikTok, have emerged as a new model of online consumption, generating a new platform through which to monetize Internet users. On the other hand, even more disruptive in the long term, is the emergence of the so-called super apps: a sort of virtual Swiss Army knives that allow users to access many products and services without having to leave their interface at any time, making Baidu’s traditional search engine less attractive. In this field, Tencent (with its super app Weixin/WeChat), Alibaba (Alipay) and Meituan certainly stand out. These two factors have caused Baidu’s online advertising market share to drop from 17% in 2017 to less than 7% estimated for 2022.34 To this deterioration, we should add the collapse in market value of its stake in iQiyi (video platform controlled by Baidu) and its equity holdings such as Trip.com (hotel and flight platform) …” (Click here to read the full text)
