4. Baidu, Inc. (NASDAQ:BIDU)
Number of Hedge Fund Holders: 44
Baidu, Inc. (NASDAQ:BIDU) is a Chinese multinational technology company that offers internet search services and expertise in artificial intelligence. Despite being one of the market leaders in tech, Baidu, Inc. (NASDAQ:BIDU) stock fell roughly 44% in the past 12 months due to increasing pressure from the Chinese authorities.
The People’s Bank of China announced a second interest rate cut in two straight months on January 19, whereas the Fed is looking at increasing rates in 2022. This helped with momentum in Chinese tech stocks like Baidu, Inc. (NASDAQ:BIDU), however, the Chinese market remains largely speculative due to uncertainty about regulations.
UBS analyst Wei Xiong raised the price target on Baidu, Inc. (NASDAQ:BIDU) to $230 from $220 and kept a Buy rating on the shares on January 12. Baidu, Inc. (NASDAQ:BIDU) has one of the best long-term risk/rewards while also making good progress in its car and cloud initiatives, which are aligned with government policies on technology innovation, but neither of these factors are priced into the stock, the analyst told investors in a research note.
Brendan Ahern, the chief investment officer at KraneShares, urged investors to be patient with Baidu, Inc. (NASDAQ:BIDU) as it develops its non-core businesses, and explained on November 18 that the technology investments at Baidu, Inc. (NASDAQ:BIDU) in terms of artificial intelligence may face less regulatory risks, since the internet giant understands the regulatory pressures and is investing more in AI, which is important for China’s growth in the decades to come.
In Q3 2021, 44 hedge funds were bullish on Baidu, Inc. (NASDAQ:BIDU) according to Insider Monkey’s database, with stakes equaling $2 billion. Ariel Investments, in the third quarter of 2021, increased its position in the company by 13%, holding 2.60 million shares worth roughly $400 million.
Here is what Ariel International & Ariel Global Fund has to say about Baidu, Inc. (NASDAQ:BIDU) in its Q3 2021 investor letter:
“When we have such a high level of conviction for a company it is not uncommon for us to own it in size across our portfolios. Such is the case with technology giant Baidu, whose leading search engine has been dubbed the “Google of China.” This quarter shares sold off in sympathy with the Chinese internet sector as investors were rattled by the government’s sweeping regulatory crackdown intended to promote “common prosperity” by easing wealth inequality. While we recognize the greater political risk of investing in emerging markets such as China and incorporate an appropriately higher risk premium in the discount rate in our valuation models, we believe Baidu’s business strategy is aligned with national policies and priorities and is therefore not adversely impacted unlike some other players in the internet sector who are in the eye of the storm.
Indeed, the Chinese government recognizes Baidu’s large, upfront investments in many next-generation artificial intelligence (AI) technologies and hails it as a national champion. For example, the company’s Advanced Driving Support System (ADAS), Apollo, has twice as much data on miles driven than any other initiative in the world, giving Baidu (and China) a large lead in the global AI arms race. In addition, Baidu’s cloud offering touts highly differentiated Platform as a Service (PaaS) features and capabilities for a demanding enterprise customer base. While these initiatives are a temporary drag on margins and require long-term execution, their success will bolster China’s “dual circulation” strategy aimed at spurring domestic demand, innovation and self-reliance.” (Click here to see the full text)
