Was The Smart Money Right About Baidu, Inc. (BIDU)?

The Insider Monkey team has completed processing the quarterly 13F filings for the June quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Baidu, Inc. (NASDAQ:BIDU).

Baidu, Inc. (NASDAQ:BIDU) shareholders have witnessed a decrease in hedge fund sentiment recently. Baidu, Inc. (NASDAQ:BIDU) was in 59 hedge funds’ portfolios at the end of June. The all time high for this statistic is 89. Our calculations also showed that BIDU isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

John Rogers of Ariel Investments

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, the demand for helium is soaring and there is a helium supply shortage, so we are checking out stock pitches like this emerging helium 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. Keeping this in mind let’s take a look at the recent hedge fund action surrounding Baidu, Inc. (NASDAQ:BIDU).

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

At second quarter’s end, a total of 59 of the hedge funds tracked by Insider Monkey were long this stock, a change of -34% from one quarter earlier. On the other hand, there were a total of 49 hedge funds with a bullish position in BIDU a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, 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. On Citadel Investment Group’s heels is Ariel Investments, managed by John W. Rogers, which holds a $472.2 million position; the fund has 4.4% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors 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.

Because Baidu, Inc. (NASDAQ:BIDU) has faced declining sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of hedge funds that elected to cut their entire stakes in the second quarter. Interestingly, Benjamin A. Smith’s Laurion Capital Management dropped the biggest stake of the 750 funds tracked by Insider Monkey, valued at close to $231.6 million in stock. Karthik Sarma’s fund, SRS Investment Management, also cut its stock, about $110.9 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 30 funds in the second quarter.

Let’s go over hedge fund activity in other stocks similar to Baidu, Inc. (NASDAQ:BIDU). We will take a look at 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 valuations are similar to BIDU’s market valuation.

View table here if you experience formatting issues.

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 26.3% in 2021 through October 29th and beat the market again by 2.3 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 -20.4% since the end of June (through 10/29) 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.