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Is Alibaba Group Holding Limited (BABA) Top Stock Pick in Billionaire George Soros’ Portfolio?
We recently published a list of Billionaire George Soros Stock Portfolio: Top 10 Stock Picks. In this article, we are going to take a look at where Alibaba Group Holding Limited (NYSE:BABA) stands against other top stock picks in Billionaire George Soros' portfolio.
The Man Who Broke the Bank of England
When it comes to financial lore, you’d struggle to find an investor who is as controversial as George Soros. With a net worth of $7.2 billion, Soros has made a name for himself by correctly spotting market trends, which has led to millions, if not billions, of dollars in strategic savings or profits. He cemented his reputation in financial legend, for instance, when he famously shorted the British pound in 1992 and made off with $1 billion profit in a single day. Soros is also known for overseeing the Quantum Fund, which from 1970 to 2000 produced an outstanding average yearly return of 30%.
Having founded his hedge fund, Soros Fund Management, back in the 1970s, Soros’ investment philosophy is centered around his concept of “reflexivity”. Soros believes that players in the market can influence the market themselves, causing feedback loops that can cause price deviations. The investor makes use of this idea to single out mispricings in the market to create returns. The best application for this concept is during economic bubbles. According to Soros, “When I see a bubble forming, I rush in to buy, adding fuel to the fire”. Of course, that doesn’t mean one can always hit the bullseye; we saw this during the dot-com era almost 25 years ago where Soros admitted to being beaten by billions of dollars in losses.
Soros Fund Management’s 13F portfolio contained $6.92 billion in securities as of September 30, up from $5.56 billion a quarter earlier. About 9.8% and 7.4% of those securities were in the technology and services sectors, respectively, down from 11.7% and 10.6% from the quarter prior. Healthcare, basic materials, and financials also constituted a sizable portion of the fund’s portfolio as of the third quarter of 2024.
Soros’ Opposition to AI
It’s no surprise to anyone who has followed George Soros over the years that the billionaire has a certain disdain for artificial intelligence. Soros claims that the technology poses a significant threat, especially to what he calls “open societies”, simply because AI can not only produce instruments of surveillance, but it can also be liable in its misuse. In Soros’ ideal world, AI regulations would have to be globally enforceable, though he admits that such a dream might not be realized because of the dynamics of governance across the globe. In a MarketWatch article from 2023, Soros outlined some of his thoughts regarding the technology. Here’s what he wrote:
“We, human beings, are both participants and observers in the world in which we live. As participants we want to change the world in our favor; as observers we want to understand reality as it is. These two objectives interfere with each other. I regard this as an important insight which allows me to distinguish between right and wrong.
Our Methodology
For this article we scanned Soros Fund Management’s Q3 portfolio and chose its top 10 stock picks. The stocks are ranked in ascending order of the fund’s stakes in them.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Is Alibaba Group Holding Limited (BABA) Top Stock Pick in Billionaire George Soros' Portfolio?
An e-commerce platform displaying a wide range of products to customers online.
Soros Fund Management’s stake as of Q3: $138.59 million
Alibaba Group Holding Limited (NYSE:BABA) is a tech and e-commerce company serving customers and small business owners. The company is also a leader in digital media, logistics, and cloud computing. Nonetheless, the Chinese company has faced growth challenges in recent years due to regulatory issues and U.S.-China trade and technology tensions.
To further build out its international exposure, Alibaba Group Holding Limited (NYSE:BABA) aims to integrate its Korean operations into the e-commerce platform of E-Mart. The decision follows a strategic aim of expanding worldwide when growth in its main Chinese e-commerce business has shown signs of slowing. Although performance was slow at home for its e-commerce business during the September quarter, the company received a somewhat counterbalancing impact on its cloud computing arm as well as the international divisions: Lazada and AliExpress.
Meanwhile, Alibaba Group Holding Limited (NYSE:BABA) is also doubling down on investments in cloud infrastructure to meet the increasing demand for AI-driven solutions. During Q3, Alibaba Cloud saw revenue increase 7% year-over-year, fueled by strong growth in the public cloud business. AI-related products were a highlight, as revenue from these products grew triple digits for the fifth consecutive quarter and captured an increasingly growing chunk of the public cloud.
Overall, BABA ranks 4th on our list of top stock picks in Billionaire George Soros' portfolio. While we acknowledge the potential of BABA, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BABA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
