Looking at Michael Burry’s 13F

We have decided to take a step away from looking at our own investments to study those of someone else in the industry: Michael Burry. For those who don’t know who he is, Dr. Michael Burry is a hedge fund manager famously portrayed in the movie The Big Short.

Looking at Burry’s Family Office holdings, the most important things to notice are his two thematic positions.

The first and probably most significant are his Tesla puts. They are based on the growth to value rotation that has been taking place the past few months. As more people pile out of high tech growth and pile into value, growth stocks such as Tesla have sold off. It makes sense considering the outrageous multiples that Tesla is trading at. His puts do not mean that Tesla is not a great business; we think that Tesla will certainly offer great long-term potential when it trades at more reasonable price levels. Burry also believes that Tesla is a great business doesn’t see the company as a fraud: it is just purely overvalued.

The second thematic position is Burry’s thesis on inflation: many of his positions are heavily betting on the idea that we will see heavy inflation as well as a commodity and energy bull market. In our article about the gold discrepancy, Burry’s thesis is similar to the one highlighted in our essay. Burry holds value stocks such as CVS, and he also holds positions in some FAANG stocks such as Facebook or Google, which have slowly transformed into more stable stocks over the past couple of years. This position could be because these stocks, unlike other super-growth stocks, have netted steady free cash flow and have started to deleverage. They have also begun to acquire lots of competitors and have expanded into other sectors of the market. For example, Facebook’s subsidiaries are widely diversified in the social media and messaging sectors of tech. When it comes to Facebook, we aren’t talking about true diversification of the business (which would actually be diworsification because a company like Facebook would probably be unable to manage a construction company, for example). We are talking about diversification within the tech sector, buying out smaller companies that they know how to run, such as Instagram or Whatsapp. These stocks offer great long and short-term potential due to their ability to consistently generate higher and higher earnings.

The final and probably most interesting fact to note is the tremendous year Scion Asset Management has had (his family office). Burry saw that Gamestop was trading below net asset value, and the company had recently taken on new, strong management, so its prospects looked great considering it was trading so far below intrinsic value. Burry took a massive position in the company back in September and then cashed out his position during the initial short squeeze. His net worth has exploded from 300 million dollars to over 1.2 billion dollars in just a matter of a couple of months. His family office netted over 300% returns for the 2020/2021 season thus far.

Previous
Previous

Privately Held Companies

Next
Next

401k Plans