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Baidu, Inc. (BIDU): Hedge Funds In Wait-and-See Mode

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Baidu, Inc. (NASDAQ:BIDU) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Hedge fund interest in Baidu, Inc. (NASDAQ:BIDU) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that BIDU isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Infosys Limited (NYSE:INFY), Dell Technologies Inc. (NYSE:DELL), and Lululemon Athletica inc. (NASDAQ:LULU) to gather more data points. Our calculations also showed that BIDU isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Mason Hawkins of Southeastern Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind let’s take a gander at the fresh hedge fund action encompassing Baidu, Inc. (NASDAQ:BIDU).

How have hedgies been trading Baidu, Inc. (NASDAQ:BIDU)?

At Q2’s end, a total of 49 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BIDU over the last 20 quarters. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

The largest stake in Baidu, Inc. (NASDAQ:BIDU) was held by Renaissance Technologies, which reported holding $1158.6 million worth of stock at the end of September. It was followed by Ariel Investments with a $328.2 million position. Other investors bullish on the company included First Pacific Advisors LLC, Southeastern Asset Management, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Oasis Management allocated the biggest weight to Baidu, Inc. (NASDAQ:BIDU), around 9.57% of its 13F portfolio. Keywise Capital Management is also relatively very bullish on the stock, earmarking 6.1 percent of its 13F equity portfolio to BIDU.

Due to the fact that Baidu, Inc. (NASDAQ:BIDU) has faced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of money managers who were dropping their full holdings heading into Q3. Intriguingly, Jack Woodruff’s Candlestick Capital Management dropped the biggest investment of all the hedgies followed by Insider Monkey, totaling close to $39.5 million in stock. Robert Boucai’s fund, Newbrook Capital Advisors, also cut its stock, about $25.4 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks similar to Baidu, Inc. (NASDAQ:BIDU). We will take a look at Infosys Limited (NYSE:INFY), Dell Technologies Inc. (NYSE:DELL), Lululemon Athletica inc. (NASDAQ:LULU), Roper Technologies Inc. (NYSE:ROP), TAL Education Group (NYSE:TAL), TC Energy Corporation (NYSE:TRP), and Banco Santander, S.A. (NYSE:SAN). This group of stocks’ market valuations match BIDU’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
INFY 23 711433 -4
DELL 50 2989866 11
LULU 39 686929 -1
ROP 45 1101856 7
TAL 40 2367131 2
TRP 21 255710 -3
SAN 16 351399 -2
Average 33.4 1209189 1.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.4 hedge funds with bullish positions and the average amount invested in these stocks was $1209 million. That figure was $2993 million in BIDU’s case. Dell Technologies Inc. (NYSE:DELL) is the most popular stock in this table. On the other hand Banco Santander, S.A. (NYSE:SAN) is the least popular one with only 16 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. Our overall hedge fund sentiment score for BIDU is 73.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 33% in 2020 through the end of August and beat the market by 23.2 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 3.9% 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.