We recently compiled a list of the Michael Burry's Top 10 Stock Picks Heading into 2025.In this article, we are going to take a look at where Baidu, Inc. (NASDAQ:BIDU) stands against Michael Burry's other stock picks.
Established in May 2013, Scion Asset Management is a renowned and well-regarded California-based hedge fund founded by Michael Burry. The investment management firm focuses on long-term capital appreciation via fundamental research. The company targets undervalued or misunderstood investment opportunities globally. Michael Burry, a renowned figure in the financial world, shot to fame after his accurate predictions during the 2008 financial crisis. The hedge fund manager has a bachelor's degree in economics from the University of California, Los Angeles. Also, he pursued an M.D. from Vanderbilt University School of Medicine.
After Michael Burry founded Scion Capital and predicted the late 2000s housing bubble burst, he rolled out Scion Asset Management in 2013, rebranding the prior fund.
Michael Burry Goes Long on China
As of now, Michael Burry remains optimistic about the Chinese economy, with Scion Asset Management significantly investing in renowned and well-established Chinese companies. Over the past few weeks, the Chinese stock market has seen a significant rally, with the Hang Seng Index increasing by ~17% and the SSE Composite Index rising by more than ~18% over the past month. Market experts believe that these increases primarily stemmed from the stimulus measures announced by the government.
As per the hedge fund's 13F filing for the quarter that ended June 30, Michael Burry significantly increased his ownership in the Chinese tech companies, while liquidating his investments in gold and other companies belonging to solar, energy, and other sectors. The renowned investor also entered several new positions in sectors such as financial services, healthcare, beauty, and real estate industries. Over the past few weeks, there has been growing optimism about the Chinese economy.
BBVA Research believes that the Chinese economy has been witnessing structural rebalancing amid adjustments in real estate. Thanks to the large-scale stimulus package, the company expects that the economy will bottom out in the near term. Moving forward, the firm believes that the US and Europe's rate cut cycle offers policy room for China's easing measures. As and when the large China-US rate reversion sees normalization, there can be increased capital inflows and stronger RMB.
The prolonged rebound in China after the COVID-19 pandemic, offset by other sectors such as manufacturing and real estate, significantly dragged down China's stock valuations, making it attractive for investors.
Peeking into Michael Burry's Concentrated Portfolio
'Big Short' investor's noteworthy move in Q2 2024 was a significant rise in his stake in a Chinese e-commerce giant. This stock is now the largest holding of the portfolio. Even though the Chinese regulatory landscape continues to evolve, it is demonstrating signs of easing. Therefore, market experts opine that this can help create a more favorable environment for Chinese technology companies.
Beyond e-commerce, the hedge fund manager's Q2 2024 portfolio focuses on strategic allocation throughout varied sectors. Scion Asset Management appears to be going long on the payment processing sector also. Since the investment firm has a diversified portfolio, experts believe that the company is well-placed to navigate any short-term economic headwinds.
Our Methodology
To list Michael Burry's Top 10 Stock Picks Heading into 2025, we sifted through Scion Asset Management’s latest 13F Holdings. From the list, we selected the top 10 stock picks, and the same are ranked in ascending order of the fund’s stakes in them.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A modern internet space with a person using Baidu services on a laptop.
Baidu, Inc. (NASDAQ:BIDU) is engaged in the provision of internet search services in China.
Market experts are optimistic about Baidu, Inc. (NASDAQ:BIDU)’s scaling and affordability of its AI offerings, such as ERNIE models and the Apollo Go autonomous ride-hailing service. The company continues to focus on improving margins and enhancing its market share in the GenAI and LLMs market. Its AI Cloud business is seeing accelerated growth due to strong demand for AI infrastructure and models. Baidu, Inc. (NASDAQ:BIDU)’s autonomous driving innovation, primarily Apollo Go, has been making significant strides toward commercial viability. It has been exploring numerous business models and partnerships to scale up robotaxi services.
Baidu, Inc. (NASDAQ:BIDU) focuses on making the ERNIE family of models affordable and efficient, enabling margin improvement and stable profitability. Moving forward, the primary tailwinds for growth include leadership positions in search engines, the addition of AI to it, and diversification in autonomous vehicles. Baidu, Inc. (NASDAQ:BIDU) aims to deploy 1,000 RT6 robotaxis in Wuhan by 2024 end. The company’s decade-long investment in AI seems to be paying off and should translate into long-term sustainable growth.
The transformative impact of Gen-AI and foundation models has been becoming more tangible. Across all the layers of its AI technology stack, and with the rapid adoption of applications built on top of ERNIE, Baidu, Inc. (NASDAQ:BIDU) has been scaling AI to address real-world problems.
Ariel Investments, an investment management company, released its first-quarter 2024 investor letter. Here is what the fund said:
“Alternatively, several positions weighed on performance. China’s internet search and online community leader, Baidu, Inc. traded lower alongside Chinese equities as intensifying problems in China weighed on investor sentiment during the period. The company continues to invest heavily in Artificial Intelligence (AI) and recently launched its generative AI, Ernie Bot, aimed at rivaling Open AI’s ChatGPT. While monetization of the new technology is largely dependent on regulatory review, we think Baidu should continue to experience margin improvement with the ongoing implementation of efficiency and profitability initiatives. While some investors remain on the sidelines due to uncertainty surrounding China’s economic growth, government regulations, and the political rhetoric towards Taiwan, we remain enthusiastic about Baidu’s longer-term opportunity for revenue growth and margin expansion across internet search, cloud, autonomous driving, artificial intelligence and online video.”
Overall BIDU ranks 4th on our list of Michael Burry's top stock picks. While we acknowledge the potential of BIDU as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than BIDU but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
