A regulatory filing reveals that Michael Burry, famous for his contrarian investing style, unloaded all his shares of Alibaba and put the money into JD.com.
Burry, who gained fame for his successful bet against subprime mortgages before the 2008 financial crisis, had purchased Alibaba shares in the first quarter. However, the filing shows he exited that position entirely in the second quarter. He stated that the stock's price would have to fall 50% before he would find it attractive again. He also expressed discomfort with Alibaba's plan to issue new shares, saying he couldn't "get comfortable" with the company's share issuance strategy.
Instead, Burry moved the capital into JD.com, describing it as one of his "large" positions. This shift suggests he sees better value in JD.com's business model, which is often viewed as more operationally efficient with a strong logistics network.
Burry's decision is notable because he is known for taking contrarian positions, often identifying value where others see risk. His rapid reversal - buying Alibaba in the first quarter and selling in the second - signals a quick change in his assessment of the company's prospects.
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While Burry did not cite these broader headwinds explicitly, his reference to Alibaba's share issuance suggests he was focused on dilution risk. When a company issues new shares, existing shareholders' stakes are diluted, which can pressure earnings per share and reduce the value of each share over time. His discomfort with that plan indicated he viewed it as a negative signal about management's capital allocation or future growth expectations.
His move to JD.com is also telling. JD.com has often been seen as a more straightforward e-commerce operator with a focus on logistics and direct sales. By rotating into JD.com, Burry appears to be betting on a company with less dilution risk and a more transparent business model, even as he remains cautious about the broader sector.
For retail investors, Burry's actions serve as a reminder that even successful investors can change their minds quickly. The key takeaway is not to blindly follow any single investor's trades, but to understand the reasoning behind them. Alibaba's stock has been volatile, and while some analysts see it as undervalued given its cash flow and market position, others worry about governance, regulatory overhang, and the potential for further share issuance.
Burry's sale does not necessarily mean Alibaba is a bad company - it means he believes the current price does not offer enough margin of safety. His willingness to wait for a 50% drop before re-entering underscores his disciplined approach: he would rather miss a rally than overpay for an asset.
The regulatory filing that revealed this trade is a standard disclosure for large investors, but it offers a rare glimpse into the thinking of a well-known fund manager. Burry has built a following by making bold, contrarian calls and sticking to his valuation discipline even when it means walking away from popular stocks. That makes his decision to buy Alibaba in the first quarter and sell it in the second all the more notable, as it suggests a rapid shift in his view of the company's risk profile.
In the end, Burry's decision to sell Alibaba and buy JD.com is a clear expression of his current view on two of the largest e-commerce companies. Whether he is right will depend on how these companies navigate the challenges ahead. For now, his actions highlight the importance of staying flexible and reassessing investments as new information emerges.
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