Michael Burry Unleashes Stock Insights After Exiting Regulatory Constraints
Michael Burry, the prominent figure known for predicting the 2008 financial crisis and portrayed in the film 'The Big Short,' seems to have found a new voice. After closing his hedge fund to outside capital, Burry is now sharing his investment ideas through his newly created Substack platform, aptly named 'Cassandra Unchained.'
Burry's Key Stock Picks
In a recent post, Burry disclosed some of the stocks he holds and admires. These include Lululemon (LULU), Molina Healthcare (MOH), and Shift4 Payments (FOUR). Additionally, he mentioned holding shares in Federal National Mortgage Association (FNMA), also known as Fannie Mae. However, as these shares trade over-the-counter, they are not required to be disclosed in his firm's 13F filings.
Burry emphasized that these investments are intended for a minimum 3-5 year holding period. He indicated his intention to provide more detailed analysis on these and other stocks in future articles. Burry believes that companies in the $20 billion to $120 billion market capitalization range currently offer attractive investment opportunities.
Value Strategy for Oversold Stocks
Burry expressed his belief that this is an excellent time of year to identify excellent companies that have been oversold. He attributes these sell-offs to 'window dressing' practices by fund managers and investors' attempts at tax-loss harvesting. He explained that many fund managers are reluctant to showcase stocks with significant losses in their holdings by year-end, a constraint that Burry does not share.
Brief Overview of Burry's Stock Choices
* **Lululemon:** An athletic apparel retailer known for its high-end yoga pants.
* **Molina Healthcare:** Provides affordable healthcare plans and healthcare services primarily to low-income and elderly Americans.
* **Shift4 Payments:** A fintech company that offers payment processing and various commerce solutions to businesses in industries such as hospitality, restaurants, stadiums, and online retail.
* **Fannie Mae:** A government-sponsored enterprise that supports the U.S. housing market by providing credit loss guarantees on over $4 trillion of mortgages, making homeownership more accessible to Americans.
Stock Performance and Value Discounts
Interestingly, the first three stocks have appeared in Scion Asset Management portfolio updates in the past year or so. However, Burry's stake in Fannie Mae is not required to be disclosed in 13F filings because it trades over-the-counter.
Burry is known for his deep value investing approach, which involves identifying stocks that are trading below their intrinsic value. He has gained a reputation for his ability to predict economic downturns and crashes.
Year-to-date, Lululemon has experienced a significant price decline of 52%, followed by Molina Healthcare with a 49% drop, and Shift4 Payments with a 32% decline. However, it is worth noting that these stocks have rebounded by 5%-10% in the past five days, in tandem with the broader market. All three companies have market capitalizations below $25 billion, with Lululemon and Molina Healthcare trading at price-to-earnings multiples below 15x for the current fiscal year's expected earnings.
In contrast, Fannie Mae shares have seen a remarkable surge this year, surging nearly threefold. This surge is attributed to speculation that the Trump administration may seek to privatize Fannie Mae and its sister company, Freddie Mac (FMCC), ending the federal conservatorship under which the companies have operated since the financial crisis. This move could potentially pave the way for their re-listing on major exchanges.
Burry's Recent Market Stance
In a recent post on X, Burry disclosed his long position in Molina Healthcare, alongside his bearish stance on AI darling, Palantir (PLTR), through the use of put options. Even after being rebuked by Palantir's CEO, Alex Karp, Burry remained unfazed, stating that 'Long MOH and short PLTR goes together like peanut butter and bananas.' Additionally, Burry revealed earlier this week that he is also shorting Nvidia (NVDA).
Palantir's stock has experienced a remarkable surge since the beginning of 2023, increasing by approximately 26-fold, resulting in a valuation of nearly $400 billion for the AI-focused company, which represents about 90 times its expected revenue for this year.
In a separate post on X, Burry revealed that influential retail investor Keith Gill, known as 'Roaring Kitty,' contacted him in August 2019, expressing gratitude to Burry for advocating for change at struggling video game retailer, GameStop (GME). This tidbit suggests that both Gill and Burry saw potential in GameStop long before it became a darling of retail investors.
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