In the fourth quarter of 2023, David Tepper’s Appaloosa Management unveiled a stake in Alibaba (BABA) to go along with positions in several other Chinese internet stocks.
In news of note to investors considering or holding the KraneShares CSI China Internet ETF (KWEB ), the hedge fund went on a first-quarter buying spree in Chinese internet stocks. That included the addition of a new position valued at $91.29 million in the KraneShares exchange traded fund – a product widely viewed as the ETF bellwether on Chinese internet equities.
The $6.23 billion KWEB, which tracks the CSI Overseas China Internet Index, accounted for 1.36% of the Appaloosa equity portfolio at the end of the first quarter, according to the hedge fund’s recently quarterly filing with the Securities and Exchange Commission (SEC), but there’s more to the story.
Appaloosa Feasts on KWEB Holdings
As experienced investors know, when it comes to equity-based ETFs, the fund’s holdings determine its performance, not the other way around. To that end, it’s likely noteworthy to KWEB investors that Tepper is bullish not only on the ETF, but on several of its marquee components as well.
In the first quarter, Appaloosa increased its Alibaba position by 158.62%, making KWEB’s second-largest component 12.17% of the hedge fund’s equity exposure. That went along with increases of 171% and 188%, respectively, to the fund’s stakes in PDD Holdings (PDD) and Baidu (BIDU) – two stocks that combine for about 10% of the KWEB roster.
Appaloosa also unveiled a new position in Chinese online retail giant JD.com (JD). KWEB’s ninth-largest holding now accounts for 1.49% of the hedge fund’s stock-based exposure. Interestingly, Appaloosa didn’t reduce its exposure to any of its China holdings in the first quarter, but it did pare its allocations to 13 U.S. stocks.
Those moves jibe with recent data indicating hedge funds have been cutting exposure to U.S. and Japanese stocks in favor of Chinese equities. Specific to Appaloosa, it is worth noting that while the hedge fund was boosting its holdings of China internet fare, it was slashing its allocations to magnificent seven names.
In the first three months of the year, five of the biggest reductions made by Tepper’s hedge fund were in magnificent seven stocks, including Microsoft (MSFT), Nvidia (NVDA), Alphabet (GOOG) and Facebook parent Meta Platforms (META).
Appaloosa also started a position in the iShares China Large-Cap ETF (FXI ) in the first three months of the year.
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