Michael Burry’s Strategic Moves: Betting on Gold and Chinese Tech Stocks

Michael Burry, the legendary investor made famous by the movie "The Big Short," has recently made significant moves in the investment world that are capturing the attention of market watchers. In the first quarter of 2024, Burry's investment firm, Scion Asset Management, doubled down on Chinese tech giants JD.com and Alibaba, while also investing heavily in physical gold.

A Closer Look at Burry’s Bold Investments
Doubling Down on Chinese Tech

Burry's recent 13F filing with the SEC reveals a strategic shift back to Chinese tech stocks. This comes after a period of reduced exposure in 2023. Notably, JD.com has become Scion's top holding, with Burry increasing his stake by 80% as Chinese stocks hit their lowest point in the first quarter. Alibaba, another major player in Burry's portfolio, saw a substantial addition of 50,000 shares, bringing its total value to around $9 million.

These investments are beginning to pay off. Efforts by the Chinese government to stabilize domestic markets and signs of improving corporate earnings have led to a rebound in Chinese tech stocks. JD.com’s U.S.-listed shares have risen over 16% this year, while Alibaba's shares have gained approximately 4.5%. However, Baidu’s ADRs, in which Burry has a smaller investment of $4.2 million, have dipped by 7%.

The renewed interest from international investors in Chinese equities is driven by attractive valuations and Beijing's policies supporting higher stock prices. The future of this rally, however, hinges on sustained earnings growth. While Tencent has recently surpassed profit expectations, Alibaba has reported lower-than-expected profitability.

Betting Big on Gold

In addition to his tech bets, Burry has made a significant investment in gold. Scion Asset Management purchased over 440,000 shares of the Sprott Physical Gold Trust (PHYS), valued at more than $10 million. This closed-end fund holds its assets in physical gold bars. The rising gold prices, driven by increasing inflation and geopolitical tensions, have reached new highs, currently standing at $2,387 per ounce.

The Strategic Implications
Burry's moves are not just opportunistic but reflect a nuanced understanding of global market dynamics. His substantial bet on JD.com and Alibaba aligns with a broader expectation of recovery and growth in the Chinese tech sector. The strategic timing—investing when these stocks were at their nadir—shows his confidence in a turnaround driven by governmental intervention and market corrections.

On the other hand, the investment in gold is a classic hedge against inflation and market volatility. As global uncertainties rise, gold remains a reliable store of value. Burry's significant allocation to physical gold indicates a cautious stance on broader economic conditions, suggesting that he anticipates further volatility or potential downturns.

Conclusion
Michael Burry's recent investments in Chinese tech stocks and physical gold highlight his strategic foresight and ability to capitalize on market inefficiencies. His actions serve as a reminder of the importance of diversification and timing in investment strategies. Whether his bets on JD.com and Alibaba will continue to pay off as Chinese markets stabilize remains to be seen, but his track record suggests a high probability of success. Meanwhile, his gold investments provide a solid hedge against economic unpredictability.

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