Michael Burry, the hedge fund manager renowned for predicting the 2008 financial crisis, has significantly increased his exposure to Chinese technology companies while simultaneously implementing protective measures against potential downside risks, according to regulatory filings.

What Happened: Burry’s Scion Asset Management made several notable adjustments to its portfolio during the third quarter, with Chinese companies now representing its largest positions. The firm increased its stake in Alibaba Group Holding Ltd BABA by 29%, making it the fund’s largest holding valued at over $21 million as of September’s end.

In a similar move, Scion doubled its position in JD.Com Inc JD, elevating it to the fund’s second-largest holding at approximately $20 million. The firm also expanded its stake in Chinese search giant Baidu Inc BIDU by 67%, bringing the position to $13.2 million.

However, in what appears to be a cautionary strategy, Burry has simultaneously established put options against these same holdings. Put options typically increase in value when the underlying securities decline, suggesting a hedging strategy designed to protect against potential market volatility.

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The timing of these moves coincides with Beijing’s recent economic stimulus announcements aimed at reinvigorating growth in the world’s second-largest economy. While Chinese equities initially rallied in September following these signals, gains have moderated as investors await more concrete fiscal measures.

Beyond his Chinese technology focus, Burry has also increased positions in several U.S. companies, including Shift4 Payments Inc. FOUR, American Coastal Insurance Corp. ACIC, and Molina Healthcare Inc. MOH.

Why It Matters: Burry’s top three Chinese holdings have posted average gains of nearly 60% over a two-month period, according to market data.

Burry’s moves are being closely watched by market participants, particularly given his track record. He gained widespread recognition for his prescient bet against mortgage-backed securities before the 2008 global financial crisis, a story later chronicled in Michael Lewis‘s bestseller “The Big Short” and its subsequent Oscar-winning film adaptation.

It’s worth noting that these positions reflect holdings as of Sep. 30, as required by SEC regulations for funds managing over $100 million in assets. Given the 45-day reporting delay and Burry’s active trading style, current positions may have already changed.

The development comes as other prominent investors adjust their Chinese holdings. Billionaire investor David Tepper’s Appaloosa Management recently reduced its Alibaba stake by 5%, though the position remains the fund’s largest holding at 15.75% of its $6.7 billion portfolio.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.