Baidu.com, Inc. (ADR) (BIDU): A Little-Known Metric Screaming ‘Sell’

Baidu.com, Inc. (ADR) (NASDAQ:BIDU) was in 31 hedge funds’ portfolio at the end of December. BIDU has experienced a decrease in activity from the world’s largest hedge funds recently. There were 39 hedge funds in our database with BIDU positions at the end of the previous quarter.

To most stock holders, hedge funds are perceived as worthless, outdated financial vehicles of years past. While there are over 8000 funds with their doors open today, we at Insider Monkey look at the bigwigs of this club, about 450 funds. It is widely believed that this group oversees the majority of the hedge fund industry’s total asset base, and by paying attention to their highest performing equity investments, we have unsheathed a number of investment strategies that have historically outperformed the S&P 500 index. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 24 percentage points in 7 months (explore the details and some picks here).

Just as key, bullish insider trading sentiment is another way to parse down the world of equities. As the old adage goes: there are lots of stimuli for an executive to get rid of shares of his or her company, but just one, very obvious reason why they would buy. Various empirical studies have demonstrated the impressive potential of this tactic if you understand where to look (learn more here).

Keeping this in mind, let’s take a peek at the key action regarding Baidu.com, Inc. (ADR) (NASDAQ:BIDU).

What does the smart money think about Baidu.com, Inc. (ADR) (NASDAQ:BIDU)?

In preparation for this year, a total of 31 of the hedge funds we track held long positions in this stock, a change of -21% from the third quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their stakes substantially.

When looking at the hedgies we track, William B. Gray’s Orbis Investment Management had the biggest position in Baidu.com, Inc. (ADR) (NASDAQ:BIDU), worth close to $569.9 million, comprising 5.7% of its total 13F portfolio. Sitting at the No. 2 spot is Chase Coleman and Feroz Dewan of Tiger Global Management LLC, with a $215.6 million position; 4% of its 13F portfolio is allocated to the company. Other peers with similar optimism include Ken Fisher’s Fisher Asset Management, William von Mueffling’s Cantillon Capital Management and Kerr Neilson’s Platinum Asset Management.

Because Baidu.com, Inc. (ADR) (NASDAQ:BIDU) has experienced bearish sentiment from the smart money, logic holds that there exists a select few money managers that decided to sell off their entire stakes last quarter. Intriguingly, Robert Karr’s Joho Capital said goodbye to the largest stake of the 450+ funds we watch, totaling an estimated $39.5 million in stock.. James Crichton and Adam Weiss’s fund, Scout Capital Management, also cut its stock, about $39.2 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 8 funds last quarter.

What have insiders been doing with Baidu.com, Inc. (ADR) (NASDAQ:BIDU)?

Insider purchases made by high-level executives is best served when the primary stock in question has experienced transactions within the past six months. Over the latest six-month time period, Baidu.com, Inc. (ADR) (NASDAQ:BIDU) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Baidu.com, Inc. (ADR) (NASDAQ:BIDU). These stocks are Tripadvisor Inc (NASDAQ:TRIP), Yandex NV (NASDAQ:YNDX), Facebook Inc (NASDAQ:FB), LinkedIn Corp (NYSE:LNKD), and Yahoo! Inc. (NASDAQ:YHOO). This group of stocks belong to the internet information providers industry and their market caps match BIDU’s market cap.

With the returns demonstrated by our research, everyday investors must always watch hedge fund and insider trading sentiment, and Baidu.com, Inc. (ADR) (NASDAQ:BIDU) is no exception.

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