MW Michael Burry added to bets on Chinese stocks last quarter - but there's a catch

By Joseph Adinolfi

The famed investor upped his stakes in Alibaba, Baidu and JD.com, but also protected his downside with put options

Michael Burry, the hedge-fund investor made famous by Michael Lewis's book "The Big Short," upped his bets on Chinese stocks during the third quarter - but he's also making sure to protect his downside.

Burry's Scion Capital Management bought 45,000 shares of Alibaba Group Holdings Ltd. $(BABA)$, the U.S.-traded ADRs of the Chinese e-commerce giant, during the third quarter, raising the size of his stake to 200,000 shares, according to a filing released on Wednesday.

But he also covered the majority of that position with put options, which would pay off if the stock were to decline. The filing represents a snapshot of Burry's portfolio as of Sept. 30. It doesn't reflect any changes made before or since.

He also bought 50,000 additional shares of Baidu Inc.'s ADRs $(BIDU)$, and doubled his stake in JD.com Inc. $(JD)$, another Chinese e-commerce platform. Burry held 125,000 and 500,000 shares of the two companies, respectively, as of quarter-end. He also bought puts against both companies, the filing showed.

Baidu is best known for its search-engine product, which dominates in China similar to how Alphabet Inc.'s $(GOOGL)$ $(GOOG)$ Google dominates in much of the rest of the world. Although, like Google, Baidu offers a host of other products and services.

All three stocks initially shot higher after the People's Bank of China unveiled its most aggressive stimulus since the end of the COVID-19 pandemic on Sept. 24, sparking a broad-based rally in Chinese shares, which have been struggling since the pandemic began in 2020.

However, President-elect Donald Trump's victory in the U.S. election, and additional measures announced by the Chinese government that some have described as underwhelming, have helped to reverse much of that rally.

Alibaba shares are up just 0.9% since the U.S. market closed on Sept. 23, the day before the stimulus measures were announced. JD.com shares are up 14.5% over the same period, while Baidu shares are 4.7% lower, FactSet data showed at last check.

Burry also increased his stake in Chinese stocks during the prior quarter, an earlier filing showed.

It's unclear exactly when Burry decided to increase his stake in the three firms.

The iShares China Large-Cap ETF FXI has risen 8.6% over the same period.

-Joseph Adinolfi

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November 14, 2024 15:25 ET (20:25 GMT)

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