What You Need To Know
Michael Burry, known for his role in predicting the US housing crash, has increased his bets on Chinese tech giants Alibaba (NYSE: BABA) and JD.com (NASDAQ: JD). Scion Asset Management, Burry's investment company, boosted its stake in Alibaba (BABA stock) by 50% and increased its position in JD.com (JD stock) by 75,000 shares.
Despite these investments, both stocks have struggled amid a global sell-off of Chinese shares. Burry had previously bet on these companies in 2022 but closed out his positions in 2023, only to reopen them later.
The recent decline in investor confidence, coupled with China's ongoing property crisis and slowing growth, has contributed to the market value of Chinese and Hong Kong stocks dropping by $6.5 trillion since their 2021 peak.
Burry's firm has also made bullish moves in other sectors, including healthcare, financials, and technology.
Why This Is Important for Retail Investors
Insight into a Contrarian Strategy: Despite the market downturn, Michael Burry's increased bets on Chinese tech giants Alibaba and JD.com provide retail investors with insight into a contrarian investment strategy. Burry's actions can serve as a case study for investors looking to potentially profit from going against prevailing market sentiment.
Potential Opportunities in Chinese Stocks: Burry's continued interest in BABA stock and JD.com highlights that there may still be potential opportunities in Chinese stocks, even amidst ongoing challenges such as a property crisis and slowing growth. Retail investors can consider these stocks as part of their diversified portfolios and evaluate their long-term growth potential.
Learn from a Renowned Investor: As a prominent money manager who accurately predicted the US housing crash, Michael Burry's investment moves often garner attention. Retail investors can learn from his investment strategies, research techniques, and decision-making processes to enhance their own investing knowledge and skills.
Understanding the Risks and Rewards of International Investing: Investing in Chinese stocks can provide exposure to emerging markets and diversify a retail investor's portfolio geographically. However, there are unique risks associated with international investing, and the experience of Burry's investments in Alibaba and JD.com can help retail investors understand and mitigate these risks effectively.
Valuable Insights from Other Institutional Investors: By analyzing the actions of other institutional investment firms alongside Burry's moves, retail investors can gain a better understanding of market trends, investor sentiment, and potential investment opportunities in Chinese stocks.
How Can You Use This Information?
Here are some of the investing ideas that can be explored using this information:
Contrarian Investing
Contrarian investing involves taking positions against prevailing market trends on the belief that the crowd is wrong.
Michael Burry's increased bets on Chinese tech giants Alibaba (BABA stock) and JD.com (JD stock) showcase a contrarian investment strategy, which can be explored by retail investors looking to capitalize on opportunities during market downturns.
Geographic Diversification
Geographic Diversification expands a portfolio's reach by investing in assets across different regions to mitigate the risk associated with any single country.
Burry's investments in Chinese stocks highlight the potential benefits of geographic diversification. Retail investors can consider adding exposure to Chinese tech giants like Alibaba and JD.com to diversify their investment portfolios across different regions.
Value Investing
Value investing searches for undervalued companies that trade for less than their intrinsic values, with the expectation that they will eventually be recognized by the market.
Burry's interest in these stocks amid a market downturn suggests the potential for value investing opportunities. Retail investors can analyze these companies' fundamentals, valuations, and long-term growth prospects to identify value stocks in the Chinese tech sector.
Growth Investing
Growth investing focuses on stocks of companies expected to grow at an above-average rate compared to other stocks in the market; learn more in our article titled 'What is Growth Investing?'.
The continued investments in BABA stock and JD.com by Burry indicate potential growth opportunities in the Chinese tech industry. Retail investors can explore growth investing strategies by considering these companies for their growth-oriented portfolios.
Sector Rotation
Sector Rotation is the practice of shifting investment capital from one industry sector to another to take advantage of the economic cycle.
Burry's focus on the Chinese tech sector can inspire retail investors to consider sector rotation strategies. Investors can capitalize on sector-specific growth opportunities by actively monitoring and allocating investments to sectors with strong potential, such as Chinese tech.
Read What Others Are Saying
Bloomberg: Michael Burry Adds to China Big Tech Wager as Stock Rout Deepens
CNBC: Michael Burry of ‘The Big Short’ fame buys Amazon, Alphabet and a dozen other new stocks
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Popular ETFs
Some investors prefer to invest in stocks via an exchange-traded fund for ease and reduced risk. Some popular ETFs include the following:
Large-Caps: Vanguard Mega Cap ETF (MGC)
Mid-Caps: Vanguard Mid-Cap ETF (VO)
Small-Caps: Vanguard Small-Cap ETF (VB)
Growth: iShares Core S&P U.S. Growth ETF (IUSG)
Value: iShares Core S&P US Value ETF (IUSV)
Emerging Markets: Vanguard FTSE Emerging Markets ETF (VWO)
Developed Markets: Vanguard FTSE Developed Markets ETF (VEA)
