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

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 887 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2020. What do these smart investors think about Baidu, Inc. (NASDAQ:BIDU)?

Baidu, Inc. (NASDAQ:BIDU) shareholders have witnessed an increase in hedge fund interest recently. Baidu, Inc. (NASDAQ:BIDU) was in 51 hedge funds’ portfolios at the end of December. The all time high for this statistic is 72. Our calculations also showed that BIDU isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Cathie Wood of ARK Investment Management

At Insider Monkey we leave no stone unturned when looking for 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 hydrogen fuel cell 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 new hedge fund action surrounding Baidu, Inc. (NASDAQ:BIDU).

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

At fourth quarter’s end, a total of 51 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from the third quarter of 2020. Below, you can check out the change in hedge fund sentiment towards BIDU over the last 22 quarters. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Baidu, Inc. (NASDAQ:BIDU), which was worth $1857.5 million at the end of the fourth quarter. On the second spot was Ariel Investments which amassed $633.7 million worth of shares. ARK Investment Management, First Pacific Advisors LLC, and Southeastern Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Ariose Capital allocated the biggest weight to Baidu, Inc. (NASDAQ:BIDU), around 18.92% of its 13F portfolio. GMT Capital is also relatively very bullish on the stock, setting aside 9.83 percent of its 13F equity portfolio to BIDU.

Consequently, key hedge funds have been driving this bullishness. Holocene Advisors, managed by Brandon Haley, initiated the biggest position in Baidu, Inc. (NASDAQ:BIDU). Holocene Advisors had $109 million invested in the company at the end of the quarter. Michael Kharitonov and Jon David McAuliffe’s Voleon Capital also made a $59.5 million investment in the stock during the quarter. The following funds were also among the new BIDU investors: Jack Woodruff’s Candlestick Capital Management, Steve Cohen’s Point72 Asset Management, and Mark Kingdon’s Kingdon Capital.

Let’s now review hedge fund activity in other stocks similar to Baidu, Inc. (NASDAQ:BIDU). These stocks are Prologis Inc (NYSE:PLD), Colgate-Palmolive Company (NYSE:CL), Petroleo Brasileiro S.A. – Petrobras (NYSE:PBR), Gilead Sciences, Inc. (NASDAQ:GILD), Becton, Dickinson and Company (NYSE:BDX), KE Holdings Inc (NYSE:BEKE), and Infosys Limited (NYSE:INFY). This group of stocks’ market caps are similar to BIDU’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 42.3 hedge funds with bullish positions and the average amount invested in these stocks was $1898 million. That figure was $4634 million in BIDU’s case. Gilead Sciences, Inc. (NASDAQ:GILD) is the most popular stock in this table. On the other hand Infosys Limited (NYSE:INFY) is the least popular one with only 23 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 59.8. 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 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and beat the market again by 1.6 percentage points. Unfortunately BIDU wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on BIDU were disappointed as the stock returned -2.7% since the end of December (through 4/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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