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Were Hedge Funds Right To Avoid Baidu, Inc. (BIDU)?

How do we determine whether Baidu, Inc. (NASDAQ:BIDU) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.

Baidu, Inc. (NASDAQ:BIDU) investors should pay attention to a decrease in support from the world’s most elite money managers lately. Our calculations also showed that BIDU isn’t among the 30 most popular stocks among hedge funds.

According to most market participants, hedge funds are perceived as unimportant, outdated investment tools of the past. While there are more than 8000 funds trading at the moment, Our experts choose to focus on the moguls of this club, around 750 funds. These money managers administer most of all hedge funds’ total capital, and by tailing their matchless equity investments, Insider Monkey has spotted many investment strategies that have historically outpaced the broader indices. Insider Monkey’s flagship hedge fund strategy surpassed the S&P 500 index by nearly 5 percentage points annually since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.

D. E. Shaw

We’re going to take a glance at the key hedge fund action encompassing Baidu, Inc. (NASDAQ:BIDU).

Hedge fund activity in Baidu, Inc. (NASDAQ:BIDU)

At Q4’s end, a total of 51 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the previous quarter. By comparison, 49 hedge funds held shares or bullish call options in BIDU a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

BIDU_mar2019

Among these funds, First Pacific Advisors LLC held the most valuable stake in Baidu, Inc. (NASDAQ:BIDU), which was worth $383.7 million at the end of the third quarter. On the second spot was D E Shaw which amassed $269.2 million worth of shares. Moreover, Fisher Asset Management, Citadel Investment Group, and Ariel Investments were also bullish on Baidu.com, Inc. (NASDAQ:BIDU), allocating a large percentage of their portfolios to this stock.

Since Baidu, Inc. (NASDAQ:BIDU) has experienced a decline in interest from hedge fund managers, we can see that there is a sect of fund managers that slashed their full holdings last quarter. Intriguingly, Christopher Lyle’s SCGE Management dumped the largest position of the 700 funds monitored by Insider Monkey, worth about $68.5 million in stock. Richard Barrera’s fund, Roystone Capital Partners, also said goodbye to its stock, about $50.7 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 2 funds last quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Baidu, Inc. (NASDAQ:BIDU) but similarly valued. These stocks are The TJX Companies, Inc. (NYSE:TJX), Intuitive Surgical, Inc. (NASDAQ:ISRG), Canadian National Railway Company (NYSE:CNI), and T-Mobile US, Inc. (NASDAQ:TMUS). This group of stocks’ market caps are closest to BIDU’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TJX 58 3062239 9
ISRG 49 1473696 5
CNI 24 1907652 -2
TMUS 75 3616129 -5
Average 51.5 2514929 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 51.5 hedge funds with bullish positions and the average amount invested in these stocks was $2515 million. That figure was $2837 million in BIDU’s case. T-Mobile US, Inc. (NASDAQ:TMUS) is the most popular stock in this table. On the other hand Canadian National Railway Company (NYSE:CNI) is the least popular one with only 24 bullish hedge fund positions. Baidu, Inc. (NASDAQ:BIDU) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately BIDU wasn’t in this group. Hedge funds that bet on BIDU were disappointed as the stock returned 7.5% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.

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

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