Sold all shares of BIDU, then purchased:
$1225.25 for OWL
I was very disappointed in Baidu. Its execution on several important strategic businesses like AI Cloud and LLM chatbot are very poor; Apollo is too slow to matter; and its core search business entered a structural decline in both usage and advertising revenue due to its strategic move in showing AI-generated content on the prime real estate of search results, and more importantly, competitions from short-video platforms (such as Douyin and Kuaishou), social media commerce ecosystems (such as Xiaohongshu), and rival AI chatbots. The market cap is about $31 billion, which is very undervalued compared with a brief sum-of-the-parts analysis. However, it's just a cigarbutt play, not a growth play anymore. I doubt its capital allocation can make it a worthwhile investment, so I am giving up Baidu (more details).
Holding BIDU for roughly two and a half years resulted in a 5.9% loss, representing approximately 0.5% of my net asset value. It's definitely a very bad mistake. Luckily the impact of the mistake was small.
The IRR of my portfolio underperformed a hypothetical SPY-only portfolio by 232 basis points, which shows a great decline in performance since my last update on 09/04 when the underperformance was just 38 basis points. Moreover, the year-to-date return also turned negative, due to the poor performance in the alternative asset managers (again and again!). The biggest explanation of the underwhelming alts comes from the recent expectations and actual implementation of Federal Reserve interest rate hikes (news). which placed significant downward pressure on the stock prices of alternative asset managers. Higher rates raise borrowing costs and heighten market uncertainty, weighing heavily on sentiment across the sector. Also, alternative investments get a little bit less competitive when the zero-risk treasuries have a higher return.
That being said, I still have a lot of confidence in them given the growth prospects and the sticky asset base under management of their business models. Alternative investments like private credits provide a good spread against treasuries for 400-500 basis points, so they are still competitive enough to attract and retain most of the investors, helping the alts to grow their assets under management. The market will agree with me one day.
Transactions
Recent and upcoming dividend distributions
Portfolio performance snapshot
Total return:
One-year return:
Portfolio IRR (calculation): 15.84%
Approximated IRR for a hypothetical SPY-only portfolio: 18.16%
Individual holdings:
Breakdown by categories (real-time):
Total returns for individual holdings:
Last prices:
Portfolio holdings conviction
The convictions in the table below reflects my current opinions and will guide the future contribution of additional investment to existing holdings. Stocks not inside the table are stocks with subpar return on equity that will be very unlikely to receive more contributions from new money (there can be exceptions for very cheap stocks). All of my writeups can be found here.
Conviction in long-term prospects means how much I believe a company would match or outperform the market (e.g. S&P 500) in the long run. Valuation matters so the conviction generally corresponds to the neutral rating of Valuation. It has the following ratings: weak, moderate, strong
Valuation: greatly overvalued, overvalued, slightly overvalued, neutral, slightly undervalued, undervalued, greatly undervalued
