Investing isn’t for everyone, and success stories are fewer than you might think. It’s hard not to be inspired by Michael Burry’s journey. Picture a young man, dabbling in investments while pursuing a medical degree, who managed to catch the eye of big names like Vanguard.
Michael Burry made a name for himself by betting against the housing market, a move that netted him around $100 million. He even featured as a key figure in the Oscar-winning film “The Big Short.” If you’ve seen the film, you might wonder what it takes to invest like Michael Burry. Although it’s not as straightforward as it may appear, let’s delve into his investment strategy and the kind of stocks he favors.
What Investments Does Michael Burry Favor?
Let’s explore five stocks that are currently in Michael Burry’s sights:
- Alibaba Group Holding Limited (NYSE:BABA) is a major player in the online retail and technology sectors globally. Market analysts have given it a “Strong Buy” rating, predicting its stock price could increase by $57, reaching an average target of $140.
As of the third quarter of 2023, Alibaba had caught the attention of 112 out of 910 hedge funds surveyed, with David Tepper’s Appaloosa Management LP making the largest investment in Alibaba, valued at $372 million.
- Booking Holdings Inc. (NASDAQ:BKNG): Michael Burry’s interest in Booking Holdings Inc., a travel service provider, highlights his strategic investments, with a noteworthy $4.6 million directed here as of September 2023. Intriguingly, he also positioned himself with put options valued at $7.7 million, signaling his anticipation of a potential decline in the company’s stock price. This move, alongside his investments in Alibaba and JD, marked a new direction in his portfolio for the third quarter.
- Star Bulk Carriers Corp. (NASDAQ:SBLK): This Greek dry bulk cargo shipper has garnered Burry’s attention with a $4.8 million investment. Given its correlation with the global economy’s health, analysts are bullish, projecting an average target price of $23.97. Within the hedge fund community, Star Bulk Carriers attracted investments from 15 out of 910 funds, with Howard Marks’ Oaktree Capital Management leading the charge with a substantial $461 million investment.
- Nexstar Media Group, Inc. (NASDAQ:NXST): Specializing in television and broadcasting, Nexstar saw a significant boost from Burry, increasing his stake by 225% to $6.9 million in the third quarter. This leap signifies one of the largest in his portfolio adjustments. With an analyst consensus of Strong Buy and an anticipated price surge of around $55, Nexstar stands out in Burry’s selection. Amy Minella’s Cardinal Capital led the hedge fund interest in this company, with a $129 million investment.
- Stellantis N.V. (NYSE:STLA): As one of the leading global automakers, Stellantis is navigating the challenges of union strikes in the U.S., offering buyouts to reshape its workforce for a push towards electric vehicles. Burry’s $7.6 million investment in the company reflects a keen eye on sectors poised for transformation. Arrowstreet Capital, under Peter Rathjens, Bruce Clarke, and John Campbell, held the largest hedge fund stake at $420 million, among 27 funds investing in Stellantis by the second quarter of 2023.
Michael Burry, renowned for his value investing approach, champions the time-tested principles of Benjamin Graham and David Dodd’s “Security Analysis.” Central to his strategy is the “margin of safety” concept, which focuses on identifying and investing in companies whose stock prices are significantly below their intrinsic value. By doing so, Burry positions himself for potential gains as these stocks eventually realign with their true worth.
What sets Burry apart in the realm of value investing are his distinctive strategies and insights:
- Broad Horizon for Value: Burry’s hunt for value knows no bounds. He encapsulates this ethos with the mantra, “If I see value in it, it’s a potential portfolio candidate,” showcasing his openness to diversify across different sectors and assets.
- Beyond Stocks: Although a stock market enthusiast, Burry’s most celebrated investment move was not in stocks but in credit default swaps, through which he famously bet against the housing market, showcasing his ability to find value in complex financial instruments.
- Independent Analysis: He places great trust in his own research and analysis, steering clear of herd mentality and market hysteria. This independence allows him to unearth opportunities overlooked by others.
- Contrarian Bets: Burry often goes against the grain, investing in sectors that are not in vogue or are facing temporary setbacks. He sees these moments of “irrational selling” as golden opportunities to acquire robust companies at a discount.
- Selective Investing: At the end of 2022, Scion Asset Management’s portfolio consisted of just nine stocks, underscoring Burry’s philosophy of quality over quantity. He prefers to concentrate his investments in a few, carefully chosen stocks that offer both good value and a strong margin of safety.
Michael Burry’s success lies not just in following the principles of value investing, but in how he adapts and applies these principles with a unique perspective and steadfast conviction in his analysis. This blend of traditional wisdom and innovative strategy has cemented his status as a distinguished figure in the investment world.
