Michael Burry, the investor who famously predicted the 2008 financial crisis and inspired the film The Big Short, continues to invest in Chinese companies in the third quarter of this year. However, he also implemented a hedging strategy to manage risks in case the stock prices of these companies decline.
On Friday, Burry’s hedge fund, Scion Asset Management, submitted its 13F filing for the third quarter of 2024 to the U.S. Securities and Exchange Commission (SEC). The filing revealed that Burry increased his exposure to Chinese companies during the third quarter. Institutions that invest over $100 million in U.S. stocks must report their long positions quarterly through the SEC’s 13F filings.
Specifically, Burry raised his holdings in Alibaba, a Chinese e-commerce company listed on the New York Stock Exchange, from 155,000 shares in the second quarter to 200,000 shares, an increase of nearly 30%. He also doubled his stake in JD.com, increasing his holdings from 250,000 to 500,000 shares, and raised his position in Baidu by about 67%, bringing his total to 125,000 shares.
As a result, the three Chinese companies now account for 65% of Burry’s portfolio, with a combined stock value of $54 million.
Burry began focusing on Chinese companies about two years ago. In late 2022, Scion first acquired positions in Alibaba and JD.com, only to sell them off briefly before repurchasing and steadily increasing his holdings. This year, he also initiated a position in Baidu, buying 40,000 shares in the first quarter and expanding further in subsequent quarters.
However, in the third quarter, Burry also purchased put options for 168,900 shares of Alibaba, aiming to minimize losses from a potential decline in the company’s stock price. He also bought put options for JD.com and Baidu, acquiring 500,000 and 83,300 shares, respectively. The total value of the put options for these three Chinese stocks amounts to $46.69 million.
Alibaba’s stock price reached $83.34 at the end of August but surged to $117.52 on October 7, buoyed by China’s government stimulus measures, before falling back to $90.58 by mid-November. The stock prices of JD.com and Baidu also peaked in early October and have since declined by about 20%.
Wall Street strategists and asset managers have expressed caution regarding the long-term outlook for the Chinese stock market, citing reasons such as the economic slowdown and weak domestic consumption, according to Bloomberg. Additionally, the possibility of increased tariffs on Chinese imports looms with Donald Trump’s potential re-election.
While Chinese stocks dominate Burry’s portfolio, he adjusted his holdings in Shift4 Payments, Molina Healthcare, and Olaplex by 50%, 22%, and 1%, respectively. At the same time, he cut his stake in The RealReal by half, reduced his holdings in American Coastal Insurance by 60%, and sold all shares of Hudson Pacific Properties and BioAtla.
The 13F filings do not reflect institutions’ current holdings or include short positions or stocks outside the U.S., so investors should exercise caution.
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