Were Hedge Funds Right About Baidu, Inc. (BIDU)?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Baidu, Inc. (NASDAQ:BIDU).

Hedge fund interest in Baidu, Inc. (NASDAQ:BIDU) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that BIDU isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Infosys Limited (NYSE:INFY), Dell Technologies Inc. (NYSE:DELL), and Lululemon Athletica inc. (NASDAQ:LULU) to gather more data points. Our calculations also showed that BIDU isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

At the moment there are a multitude of tools market participants employ to evaluate stocks. A couple of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the best picks of the best money managers can trounce their index-focused peers by a very impressive margin (see the details here).

Mason Hawkins of Southeastern Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We go through lists like the 10 best high dividend stocks to buy to identify solid dividend stocks trading at rock bottom prices. 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 website to get excerpts of these letters in your inbox. With all of this in mind we’re going to take a look at the recent hedge fund action surrounding Baidu, Inc. (NASDAQ:BIDU).

Hedge fund activity in Baidu, Inc. (NASDAQ:BIDU)

At the end of June, a total of 49 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards BIDU over the last 20 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, Renaissance Technologies, holds the largest position in Baidu, Inc. (NASDAQ:BIDU). Renaissance Technologies has a $1.1586 billion position in the stock, comprising 1% of its 13F portfolio. Sitting at the No. 2 spot is Ariel Investments, managed by John W. Rogers, which holds a $328.2 million position; 5% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism include Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC, Mason Hawkins’s Southeastern Asset Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Oasis Management allocated the biggest weight to Baidu, Inc. (NASDAQ:BIDU), around 9.57% of its 13F portfolio. Keywise Capital Management is also relatively very bullish on the stock, setting aside 6.1 percent of its 13F equity portfolio to BIDU.

Since Baidu, Inc. (NASDAQ:BIDU) has faced falling interest from the smart money, we can see that there is a sect of funds who were dropping their positions entirely last quarter. It’s worth mentioning that Jack Woodruff’s Candlestick Capital Management cut the biggest position of the 750 funds watched by Insider Monkey, comprising close to $39.5 million in stock. Robert Boucai’s fund, Newbrook Capital Advisors, also dumped its stock, about $25.4 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks similar to Baidu, Inc. (NASDAQ:BIDU). These stocks are Infosys Limited (NYSE:INFY), Dell Technologies Inc. (NYSE:DELL), Lululemon Athletica inc. (NASDAQ:LULU), Roper Technologies Inc. (NYSE:ROP), TAL Education Group (NYSE:TAL), TC Energy Corporation (NYSE:TRP), and Banco Santander, S.A. (NYSE:SAN). 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 33.4 hedge funds with bullish positions and the average amount invested in these stocks was $1209 million. That figure was $2993 million in BIDU’s case. Dell Technologies Inc. (NYSE:DELL) is the most popular stock in this table. On the other hand Banco Santander, S.A. (NYSE:SAN) is the least popular one with only 16 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 73.9. 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 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 30% in 2020 through October 23rd and beat the market by 21 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 11.7% since the end of June (through 10/23) 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 so far this year.

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