Michael Burry, best known for his work on the subprime mortgage crisis, made a series of changes to his portfolio last quarter, including hedging huge bets on Chinese internet stocks. A regulatory filing showed that Burry, now the manager of hedge fund Scion Asset Management, has increased his holdings of American depositary receipts (ADRs) in several Chinese Internet companies. The trader increased his bet on Alibaba by 29%, valuing the holding at more than $21 million, making it his largest position at the end of September. The high-profile investor also doubled his stake in JD.com, making it Scion’s second-largest holding, worth $20 million. By the end of the third quarter, Burry had also increased its stake in Chinese search engine Baidu by 67%, bringing its bet to $13.2 million. While buying these ADRs, Barry held a large number of put options on these stocks, possibly as a hedge of sorts. Investors can profit from put options when the price of the underlying security falls. But when combined with long-term holdings, they can be used to offset any short-term losses expected in a stock. As of late September, Burry owned millions of dollars’ worth of put options on Alibaba, JD.com and Baidu whose value, strike price or expiration date were unknown, documents show. Chinese stocks got a boost in September after the government unleashed a raft of stimulus measures to revive growth and avoid continued stagnation in the world’s second-largest economy. However, many stocks gave back some of their gains as officials have yet to announce specific fiscal support. Burry rose to prominence by shorting mortgage-backed securities before the 2008 global financial crisis. Barry was portrayed in Michael Lewis’ book “The Big Short” and the subsequent Oscar-winning film of the same name. In addition to these Chinese companies, Burry has bet on payment processing company Shift4 Payments, American Coast Insurance Company and managed care company Molina Healthcare. Fund managers with more than $100 million in assets must disclose their long positions to the SEC 45 days after the end of the quarter. Active traders like Barry may have changed their stance by the time the documents were released.
