'Big Short' Investor Michael Burry Ditches Gold, US Stocks For Cheap Chinese Internet Companies

Scion Asset Management founder Michael Burry is known for betting against the housing market during the 2008 financial crisis. The trade, which netted him $700 million, was chronicled in the award-winning film Big Short. His contrarian approach and unique foresight also prompted trades like buying water assets, forecasting future scarcity, and investing in GameStop before it was a meme stock.

According to the hedge fund's 13F filing for the quarter ended June 30, Burry significantly increased his stake in Chinese internet companies like Baidu and Alibaba while completely offloading investments in gold and companies like Citigroup, First Solar, Vital Energy, Cigna Group, and Advance Auto Part.

The offloading also impacted Scion's stake in JD.com, as Burry sold 110,000 shares or 30.56% of his JD stake in Q2. Elsewhere, he added 30,000 Alibaba shares to own 155,000 of the tech giant's shares worth $11.2 million, while his exposure to Baidu increased by 87.5% in Q2, worth $6.49 million.

Burry also entered multiple new positions in the financial services, beauty and healthcare, and real estate industries. He invested at least $5 million in companies like Shift4 Payments, Hudson Pacific Properties, and Molina Healthcare. Burry's hedge fund currently holds ten stocks worth over $52 million, down almost 50% compared to Q1. Alibaba, Baidu, and JD.com make up over 45% of the portfolio, with Alibaba being the largest holding overall.

Alibaba Prioritizing Dividends and Buybacks

Alibaba recently started paying dividends and has been increasing buybacks for a while. The company allocated $5.8 billion to Q2 buybacks, as it remains in a strong cash position. The situation may help sustain the current pace of buyback in the near term. China's prolonged post-pandemic rebound, stunted by a manufacturing and real estate slump, significantly dragged down China's stock valuations to very attractive levels for investors.

Baidu Rapidly Scaling AI Integration

Baidu, China's leading search engine, is among the top AI players, heavily leveraging machine learning and neural networks to enhance user experience. The company recently announced the launch of a new AI model, Ernie 4.0 Turbo, after the massive success of the Ernie 4 launch in October 2023 to rival OpenAI's GPT-4. The Ernie bot, which provides generative AI services, has amassed over 300 million users since its launch late last year.

BioAtla Receives FDA Nod For Cancer Drug

Burry opened a new position in US-based cancer drug manufacturer BioAtla, which uses its proprietary Conditionally Active Biologics (CAB) technology to treat different forms of cancer, including those linked to solid tumours, with higher efficacy and more predictable outcomes. The hedge fund purchased 633,960 shares of the biopharma company worth $869,000 in Q2. The company recently received Fast Track Designation from the US FDA for its Ozuriftamab Vedotin drug to treat squamous cell carcinoma. During its Q2 earnings call, BioAtla highlighted the significant year-over-year reduction in losses and administrative costs.

More Investors Capitalize On Cheap Valuations In China

Billionaire investors like David Tepper diversified their portfolios this year with massive positions in China's tech companies, taking advantage of the extremely cheap valuations of companies with solid foundations. However, geopolitical tensions with several nations, especially Taiwan, pose the risk of Chinese stocks being delisted from Western stock exchanges like Russian stocks in 2022.

Chinese stocks have mostly trailed US rivals this year, with Alibaba's American depositary receipts (ADR) gaining 7.32% to date. The KraneShares CSI China Internet exchange-traded fund has been down almost 4% in the past year but has witnessed upward pressures in recent weeks.

Disclaimer: Our digital media content is for informational purposes only and not investment advice. Please conduct your own analysis or seek professional advice before investing. Remember, investments are subject to market risks and past performance doesn't indicate future returns.