Michael Burry, the investor made famous by his role in "The Big Short," is doubling down on Chinese technology stocks, signaling his belief in the sector despite global economic uncertainties. According to a recent filing for the third quarter, Burry has significantly raised his stakes in three major Chinese tech firms—Alibaba, Baidu, and JD.com—while also employing strategies to hedge his investments.

Burry’s Scion Asset Management fund increased its position in Alibaba by 29%, bringing his total stake to 200,000 shares, valued at approximately $21 million by the end of September. Along with the stock purchase, Burry also took a bearish position by purchasing put options on nearly 169,000 of Alibaba’s shares, amounting to roughly $18 million in nominal value. This dual strategy of buying stock while hedging through options suggests Burry's cautious optimism about the company, balancing potential upside with a safeguard against downside risk.

Similarly, Burry boosted his JD.com stake by doubling his holdings to 500,000 shares, worth about $20 million. He also bought an equal number of put options on these shares, indicating a similar approach to managing risk while making a strong bet on JD.com’s future.

Baidu, another key player in Burry's portfolio, saw a two-thirds increase in Scion’s position, with Burry acquiring 125,000 shares valued at just over $13 million. As with Alibaba and JD.com, he also bought put options on roughly 83,000 shares of Baidu, a clear sign of his strategy to hedge the potential volatility in the Chinese tech market.

Altogether, these three hedged positions amounted to $43.6 million in nominal value—more than half the total value of Scion’s entire stock portfolio, which grew by 64% during the quarter, reaching a value of over $86 million. This significant increase in value was despite the fact that Burry trimmed his portfolio, reducing his non-option stock positions from ten to just eight.

The timing of these moves coincides with a period of volatility for Chinese stocks. Late September saw a brief rally in Chinese stocks following the Chinese government’s announcement of an ambitious stimulus package aimed at reviving the country’s economic growth. However, this optimism has since been tempered as more details of the stimulus plan have yet to materialize, leading to a dip in stock prices.

Notably, Burry’s portfolio did not include any new positions last quarter, signaling that his focus remains on selectively increasing stakes in stocks he already believes in. Aside from his major moves in Alibaba, JD.com, and Baidu, he also added to existing holdings in Molina Healthcare, Shift4 Payments, and Olaplex. Meanwhile, he exited positions in BioAlta and Hudson Pacific Properties and made significant reductions in his investments in TheRealReal and American Coastal Insurance.

Burry, who gained widespread recognition for predicting the 2008 financial crisis, has never shied away from making contrarian bets. His previous investment strategies have ranged from betting against the S&P 500 and major tech stocks like Apple and Tesla to warning about the risks of speculative bubbles in cryptocurrency and meme stocks. Burry’s latest moves in Chinese tech stocks indicate a calculated risk in a volatile sector, but also reflect his ongoing strategy of balancing high-risk, high-reward bets with risk mitigation through hedging.

As China’s economic outlook remains uncertain, Burry’s large, hedged bets on Chinese tech stocks suggest he sees potential value in these companies, albeit with a cautious approach to the possible challenges ahead. The moves may also signal confidence in the long-term prospects of Chinese innovation and its role in the global tech landscape, despite the short-term market turbulence.

BUSINESSINSIDER