Here’s Why Horos Asset Management Sold its Baidu (BIDU) Stake

Horos Asset Management, an investment management firm, published its first quarter 2021 investor letter – a copy of which can be downloaded here. A return of 21.5% was delivered by the Horos Value Internacional Fund for the Q1 of 2021, outperforming the Index, which appreciated 8.9% for the same period. The Horos Value Iberia returned 13.0%, beating the 5.4% rise of its benchmark  You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Horos Asset Management, in its Q1 2021 investor letter, mentioned Baidu, Inc. (NASDAQ: BIDU), and shared their insights on the company. Baidu, Inc. is a Beijing, China-based internet company that currently has a $63.1 billion market capitalization. Since the beginning of the year, BIDU delivered a -13.31% return, extending its 12-month gains to 74.23%. As of May 14, 2021, the stock closed at $186.21 per share.

Here is what Horos Asset Management has to say about Baidu, Inc. in its Q1 2021 investor letter:

“We have also fully exited our stake in Baidu, following their outstanding performance during the period and their lower relative upside potential compared to other investment alternatives, which we will discuss below.

The Chinese technology platform company Baidu has also been held in the portfolios managed by Alejandro, Miguel and myself for several years. During this period, we have seen very high volatility in its share price, which we have taken advantage of to make significant rebalancing moves in our position (in fact, we even sold our entire position once, when we thought the stock’s upside potential was exhausted). After several years of instability, market sentiment turned very positive, putting an end to the historical advertising problems in the healthcare sector, the divestments in O2O (Online-to-Offline) businesses that continued to weigh on the company’s margins, the IPO of part of the iQiyi streaming business (which hid Baidu’s underlying cash generation capacity) and the tough competition from other industry giants such as Tencent and Alibaba, as well as the entry of new players with disruptive business models (ByteDance). At the same time, the company’s recent commitment to electric vehicles contributed even more to this change of narrative. Baidu’s share price rose almost fourfold from the March 2020 lows to all-time highs and reached a valuation where the margin of safety, in our view, was too narrow.”

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Our calculations show that Baidu, Inc. (NASDAQ: BIDU) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Baidu, Inc. was in 51 hedge fund portfolios, compared to 43 funds in the third quarter. BIDU delivered a -40.28% return in the past 3 months.

The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

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