Stocks bought by Hedge Funds this week

What happened?

Michael Burry's Scion Asset Management has significantly increased its investment in Alibaba and JD.com, with both stocks becoming its largest holdings.

The stake in Alibaba rose by 50% to 75,000 shares worth over $5.5 million,

The ownership in JD.com increased by 60% to 200,000 shares valued at more than $4.6 million.

Despite their significant losses, with Alibaba down nearly -30% and JD.com off more than 50% over the past year, Burry believes they represent compelling value.

However, the ongoing regulatory crackdown on Chinese tech companies and economic challenges in China pose risks to their recovery. While these stocks appear cheap based on fundamental metrics, they have yet to prove themselves as reliable investments, raising questions about whether they are genuine opportunities or value traps.

Burry's bullish stance mirrors his past successful bets, but investors may need to exercise caution given the uncertainty surrounding these companies and the broader Chinese market

What happened?

Bridgewater Associates significantly increased its stake in Nvidia by +458% , acquiring 220,381 more shares to hold a total of 268,489 shares in the chip maker. The value of Bridgewater's Nvidia stake surged to $133 million by the end of 2023. As of the filing date, the stake would be valued at approximately $212 million.

The last time that Bridgewater reported a Nvidia stake was in the third quarter of last year. It's worth noting the new wager is small relative to the firm's biggest positions on September 30, which included a $700 million stake in Procter & Gamble and roughly $500 million positions in each of Costco and Coca-Cola.

Nvidia's stock price has soared by about 240% this year, as investors wager the artificial-intelligence boom will supercharge demand for its graphics chips. The company has certainly received a boost; its revenue roughly doubled year-on-year to about $14 billion in the three months to July, lifting its net income by nearly 10-fold to over $6 billion.

Funds tied to other high-profile investors took a different tack to Gates and Dalio's firms. Soros Fund Management dumped its entire $4 million stake in Nvidia, Jim Simons' Renaissance Technologies slashed its bet by 34% to 1.2 million shares, and Stanley Druckenmiller's Duquesne Family Office trimmed its position by about 8% to 875,000 shares, filings showed this week.

What happened?

Soros Fund Management purchased 595,000 shares of KeyCorp (KEY), valued at $8.6 million.

KeyCorp, headquartered in Cleveland, Ohio, operates approximately 1,000 branches across 15 states, boasting assets of roughly $188 billion.

Soros Fund Management initiated its first trade in KeyCorp in the first quarter of 2011, with subsequent trades over time.

Assuming Soros still holds the position, potential gains on the latest purchase could be around 20%.

KeyCorp reported fourth-quarter earnings of 25 cents per share on $928 million in net interest income, surpassing FactSet consensus estimates.

KeyCorp might be undervalued give recent news:

1 - KeyCorp's credit downgrade by S&P Global to BBB from BBB+ highlights its struggles amid rising interest rates. This, together with rising interest rates are pressuring bank deposits, leading customers to seek higher yields elsewhere.

2 - KeyCorp's net interest margin has compressed, falling from 2.74% to 2.12% in a year, with net interest income declining from $1.2 billion to $986 million. Slashed guidance raises concerns about its dividend, currently yielding 7.21%.

3 - KeyCorp plans to improve margins and balance sheet by reinvesting in higher-yielding assets, potentially boosting net interest income by $900 million annually by 2025.

4 - Credit quality remains strong with low exposure to risky assets and below-average net charge-offs.

5 - Despite short-term challenges, KeyCorp's stock valuation at 1.25 times tangible book value seems low vs. main peers