1. Baidu, Inc. (NASDAQ: BIDU)
Claugus’ Stake Value: $78,344,000
Percentage of Thomas E. Claugus’ 13F Portfolio: 5.84%
Number of Hedge Fund Holders: 59
Baidu, Inc. (NASDAQ: BIDU) primarily serves the Chinese market with internet search services. It was incorporated in 2000 and stands first on the list of 10 tech stocks to invest in today according to Thomas E. Claugus’ GMT Capital. Baidu, Inc. (NASDAQ: BIDU) shares have offered investors returns exceeding 36.05% over the course of the past 12 months.
On August 19, Baidu, Inc. (NASDAQ: BIDU) announced that it launched an underwritten offering in which it publicly offered $1 billion common stock shares. The issue includes $300 million in 1.625% notes due 2027 and $700 million in 2.375% notes due 2031. Net proceeds of $0.99 billion are expected to be utilized for general company operations, debt reduction, and to fund existing Eligible Projects.
GMT Capital owns 384,227 shares of Baidu, Inc. (NASDAQ: BIDU), worth $78.34 million. This represented 5.84% of the investment portfolio of GMT Capital. There were 59 hedge funds in our database that held stakes in Baidu, Inc. (NASDAQ: BIDU) in the second quarter of 2021, compared to 89 funds in the previous quarter.
Longleaf Partners Fund, in its first-quarter 2021 investor letter, mentioned Baidu, Inc. (NASDAQ: BIDU). Here is what the fund said:
“Baidu (3%, 0.70%), the dominant artificial intelligence (AI) company in China, was another top contributor for the quarter. Baidu reported fourth-quarter results ahead of the market’s expectation. The advertising business saw a gradual recovery compared to the first half of the year. A key area of outperformance was the non-advertising revenue, which grew 52%y year-over-year (YoY) and now comprises 18% of Baidu Core. The total addressable market value of Baidu’s non-advertising business (ex-autonomous driving) is 10x the size of online advertising, and the expected compound annual growth rate (CAGR) to 2025 for non-advertising is three times faster than that of online marketing. The recent YY Live acquisition should help to further boost the non-advertising mix. Baidu’s cloud business grew 67% YoY in the quarter with an annualized run rate of US$2 billion. Baidu also made progress in Apollo, the company’s autonomous driving platform. Apollo has been granted the first driverless testing permit and received the first qualifications for commercialized autonomous driving operations in China. Baidu has set up an EV joint venture with automotive maker Geely, which could accelerate Apollo’s adoption in the industry. In March, Baidu completed a secondary listing in Hong Kong, hedging any potential risks from a forced delisting in the US. The significant investment and market leadership in Chinese autonomous vehicles and AI are material underappreciated sources of value for the company. Baidu issued 10-year bonds at 2.375% last October, which implies a cash flow multiple of 42x. Baidu currently trades at 21x earnings, but excluding cash, listed securities, and investments, and assigning zero value for their loss-making Cloud and A.I. businesses, Baidu trades at 13.4x free cash flow (FCF), equivalent to a FCF yield of 7.5%. In December, the company upsized its buyback program from $3 billion to $4.5 billion to take advantage of its severe undervaluation.
In one of the more dramatic price moves we have seen this year, Baidu’s share price spiked by 57% in the first seven weeks through late-February, after adding 71% in 2020. Taking advantage of this February strength, we cut the Baidu position in half. However, towards the end of the quarter, Baidu’s price plummeted as a result of forced liquidation sale of Archegos Capital Management’s substantial holdings in Baidu by their lenders. On March 26th, banks liquidated their margin collateral in Baidu stock through a series of block trade transactions. A massive $23.7 billion and $12 billion worth of Baidu traded on March 26th and 29th. This huge margin call is completely unrelated to Baidu’s fundamentals and our investment thesis.”
You can also take a peek at 10 Best Tech Stocks To Buy Now According To Billionaire Laffont and 10 Best Tech Stocks to Buy According to Billionaire Julian Robertson
