On Thursday Eastern Time, the 13F report published on the website of the US Securities and Exchange Commission showed that Michael Burry, a well-known Wall Street fund manager and prototype of "Big Short", continued to double his bets on Chinese concept stocks such as Alibaba in the third quarter of this year, while also adding new put options to provide downside protection.
Michael Burry is the prototype of the main character in the film "Big Short". The Scion Asset Management managed by Michael Burry once earned $750 million for investors in the real estate foam of 2007 with a scale of $600 million. Since then, he has become famous and is known as a legendary figure on Wall Street.
According to Whalewisdom statistics, the total market value of the fund's holdings in the third quarter of this year was approximately $130 million, with the top ten holdings accounting for 99.13%. In its Q3 holdings, the fund increased its holdings of 6 stocks, reduced its holdings of 2 stocks, added 3 new stocks, and cleared 2 stocks.
It should be noted that the 13-F form only requires funds to disclose long positions in the US stock market, so it cannot fully reflect the overall operation of the fund.
Massive increase in holdings of Chinese concept stocks
According to the latest 13F report, in the third quarter of this year, Scion Asset Management, a hedge fund managed by Michael Barry, continued to increase its holdings in Alibaba and Baidu, and also increased its holdings in JD.com, which had previously significantly reduced its holdings. However, he also allocated corresponding put options.
Some analysts suggest that Barry's purchase of a large number of put options is likely for some hedging purpose. When the price of the underlying security falls, investors can profit from put options. But when combined with long positions, they can be used to offset any short-term losses expected in the stock.
Specifically, the company increased its holdings of JD ADR by 250000 shares to 500000 shares during the quarter, while holding put options corresponding to 500000 ADRs; Increase holdings of Alibaba from 45000 shares to 200000 shares, while holding put options corresponding to 168900 ADRs; Increase holdings of Baidu by 50000 shares to 125000 shares, while holding 83300 put options corresponding to ADRs.
As of the end of September, Scion's holdings of the three Chinese concept stocks were valued at $54 million, accounting for approximately 65% of the fund's overall stock holdings, compared to only about 46% at the end of June. That is to say, the proportion increased by 41% within three months.
Wall Street cautiously optimistic
Barry's recent increase in holdings comes at a time when the Chinese government is intensifying its efforts to boost economic growth. The Central Politburo meeting at the end of September released a heavy signal of fiscal and monetary support. The unexpected stimulus plan has triggered a crazy rebound in Chinese stocks, but some market observers still hold a cautious and optimistic long-term attitude.
At that time, the Shanghai and Shenzhen 300 Index surged 32% within two weeks, while the Nasdaq Golden Dragon Index, which tracks US listed Chinese concept stocks, surged about 37%. However, since then, Chinese concept stocks have fallen slightly, with the stock prices of Alibaba, JD.com, and Baidu falling more than 20% since reaching their peak in early October, returning to the level at the end of September.
However, even before the significant policy shift by the Chinese government in September, Barry and billionaire investor David Tepper, founder of hedge fund Appaloosa Asset Management, were among the few well-known hedge fund investors who were bullish on Chinese stocks.
As early as the first quarter of this year, Barry significantly increased his holdings in Chinese stocks, more than doubling his holdings in Alibaba, and then further increased his holdings in the second quarter.
According to his Scion Asset Management's 13F table as of the end of the second quarter, Alibaba is the largest position in his US stock holdings, accounting for 21.26% of the overall position after continuing to add positions in Q2; Baidu and JD.com are also among the top 5 holdings, with holdings ratios close to 12% each. That is to say, these three Chinese concept stocks alone account for nearly half of Barry's stock holdings.
However, as Donald Trump is about to return to the White House, his aggressive tariff policies have raised concerns about geopolitical issues. Therefore, Wall Street tycoons are now more inclined to "cautiously bullish" on Chinese stocks.