Baidu, Inc. (BIDU) Fell Out Of Favor With Hedge Funds

In this article we will check out the progression of hedge fund sentiment towards Baidu, Inc. (NASDAQ:BIDU) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Baidu, Inc. (NASDAQ:BIDU) was in 59 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 89. BIDU investors should be aware of a decrease in hedge fund sentiment in recent months. There were 89 hedge funds in our database with BIDU holdings at the end of March. Our calculations also showed that BIDU isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

If you’d ask most market participants, hedge funds are viewed as slow, old financial vehicles of years past. While there are more than 8000 funds trading today, We look at the top tier of this group, about 850 funds. These investment experts orchestrate the lion’s share of all hedge funds’ total capital, and by watching their first-class equity investments, Insider Monkey has determined many investment strategies that have historically outpaced Mr. Market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website .

Alan Howard of Brevan Howard

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to take a look at the fresh hedge fund action surrounding Baidu, Inc. (NASDAQ:BIDU).

Do Hedge Funds Think BIDU Is A Good Stock To Buy Now?

At the end of June, a total of 59 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -34% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in BIDU over the last 24 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the most valuable position in Baidu, Inc. (NASDAQ:BIDU). Citadel Investment Group has a $648.5 million call position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by John W. Rogers of Ariel Investments, with a $472.2 million position; the fund has 4.4% of its 13F portfolio invested in the stock. Some other peers that hold long positions contain D. E. Shaw’s D E Shaw, John Overdeck and David Siegel’s Two Sigma Advisors and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Caxton Associates LP allocated the biggest weight to Baidu, Inc. (NASDAQ:BIDU), around 9.34% of its 13F portfolio. Oasis Management is also relatively very bullish on the stock, dishing out 8 percent of its 13F equity portfolio to BIDU.

Seeing as Baidu, Inc. (NASDAQ:BIDU) has witnessed declining sentiment from hedge fund managers, it’s easy to see that there was a specific group of fund managers that elected to cut their positions entirely by the end of the second quarter. Interestingly, Benjamin A. Smith’s Laurion Capital Management sold off the largest position of all the hedgies tracked by Insider Monkey, worth an estimated $231.6 million in stock, and Karthik Sarma’s SRS Investment Management was right behind this move, as the fund dropped about $110.9 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 30 funds by the end of the second quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Baidu, Inc. (NASDAQ:BIDU) but similarly valued. These stocks are Westpac Banking Corporation (NYSE:WBK), Fiserv, Inc. (NASDAQ:FISV), Becton, Dickinson and Company (NYSE:BDX), Illinois Tool Works Inc. (NYSE:ITW), Capital One Financial Corp. (NYSE:COF), Illumina, Inc. (NASDAQ:ILMN), and Equinor ASA (NYSE:EQNR). This group of stocks’ market values match BIDU’s market value.

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As you can see these stocks had an average of 42.7 hedge funds with bullish positions and the average amount invested in these stocks was $1829 million. That figure was $3474 million in BIDU’s case. Fiserv, Inc. (NASDAQ:FISV) is the most popular stock in this table. On the other hand Westpac Banking Corporation (NYSE:WBK) is the least popular one with only 4 bullish hedge fund positions. Baidu, Inc. (NASDAQ:BIDU) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BIDU is 35.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.7% in 2021 through September 27th and beat the market again by 6.2 percentage points. Unfortunately BIDU wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on BIDU were disappointed as the stock returned -23% since the end of June (through 9/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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