As chronicled in The Big Short, Michael Burry made a fortune betting against the housing market in 2008. Plenty are interested in what exactly are Michael Burry stocks (that is, stocks held by his firm, Scion Asset Management).
As seen in most recent coverage of Burry, he has been very bearish on the stock market. In fact, based on 13-F filings, Scion has sold most of its positions in U.S. stocks. The fund also exited its “big” short bets against both Tesla (NASDAQ:TSLA) and ARK Innovation ETF(NYSEARCA:ARKK) during the same timeframe, weeks before the market began to take a dive.
That said, it’s not as if the investor has completely moved to the sidelines. The Scion portfolio holds positions in many foreign stocks, plus positions in six U.S.-listed equities.
Most of them fit in well with his value-oriented investing philosophy. At the same time, there’s one stock that’s uncharacteristically Burry. In fact, at first glance, it appears to be a name that the contrarian would hold a bearish view on.
So, which names now make up the Michael Burry stocks? Let’s dive in and check out these seven, the six that are U.S.-based, plus one foreign stock you can buy over-the-counter (OTC):
- Bristol-Myers Squibb(NYSE:BMY)
- CoreCivic(NYSE:CXW)
- Fidelity National Financial(NYSE:FNF)
- General Dynamics(NYSE:GD)
- Geo Group(NYSE:GEO)
- Imperial Brands(OTCMKTS:IMBBY)
- AEA-Bridges Impact(NYSE:IMPX)
Michael Burry Stocks: Bristol-Myers Squibb (BMY)
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Last quarter, Michael Burry cashed out of two healthcare companies. First, CVS Health (NYSE:CVS). Second, biotech play Scynexis(NASDAQ:SCYX). One that Burry has added, however, is pharma giant Bristol-Myers Squibb.
As of Dec. 31, it was Scion’s largest holding. So, why is this one of the few stocks Burry has deemed worthy of a buy? It may have to do with its value stock bona fides. AsI discussed recently, BMY stock is cheap.
It sports a single-digit forward price-to-earnings (P/E ratio) while delivering strong earnings. BMY is expected to deliver earnings growth in 2023.
In recent months, shares have been moving higher. Trading between the low-$50s and low-$60s during Q4 2021 (when Burry bought it), Bristol-Myers Squibb is now in the high-$60s per share. It seems more people than just Michael Burry have caught on that it’s undervalued.
Is this a sign it’s time to move on? Possibly, as we won’t know until the next 13-F filing whether it’s still a Scion holding. Yet given its potential to make moderate gains from here, you may want to give it a look.
CoreCivic (CXW)
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Ever the contrarian, it’s no surprise two of the Michael Burry stocks are shares in private prison operators. Neither his position in CXW stock or GEO stock (discussed further below) are new positions for Burry.
He’s been long both names since 2021 when an Executive Order from the then-incoming Biden administration (calling for a phase-out of U.S. federal use of private prisons) dropped.
Many took this as a sign of the beginning of the end for both publicly-traded names. However, if you take a closer look at the details, it explains why Burry is betting against negative sentiment for this space.
While privately-run federal prisons may be on the way out, both CoreCivic and Geo Group generate most of their business from either the state & local market, or from the Department of Homeland Security (which isn’t affected by the order). Trading for fire-sale prices (around 5.4x this year’s estimated earnings), this operator is deleveraging its balance sheet.
The company could start returning its high profits back to shareholders. This could enable CXW stock, which is up slightly in the past month, to continue making a recovery. At around $9 per share today, five years ago it was trading for above $30 per share.
Fidelity National Financial (FNF)
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Like BMY stock, FNF stock is another new edition to the Burry portfolio. Mainly a provider of title insurance, this is another stock that trades at a super-low valuation (7.5x earnings).
Again, like most cheap stocks, there’s a reason for this “cheap price.”
That would be the growing concern that the housing market, after being on fire in recent years, is due for a slowdown. Yet while Burry made his bones betting against housing the last go-around, and is “Mr. Doom and Gloom” about interest rates and stocks, it’s unclear whether this means the licensed physician has a similar bearish view on the housing market.
Also, Burry’s interest in Fidelity National Financial may have less to do with its title insurance business and more to do with its annuities business. As a commentator on Reddit’s r/Burryology (yes, there’s a r/WSB subreddit devoted to him) argued, higher interest rates will be a boon for this unit.
Pulling back since Burry bought it last quarter, and offering a decent dividend (3.75% forward yield), you may want to give this prosaic value stock a closer look.
Between what may be low downside risk, and the potential to see its low valuation multiple expand? Depending on how things go with either its title insurance business, or its annuities business, shares could perform well over the next twelve months.
Michael Burry Stocks: General Dynamics (GD)
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Last quarter, Scion sold one defense industry stock, Lockheed Martin (NYSE:LMT), and bought another one (GD stock). Whether Burry’s interest in this sector as of late is a play on rising geopolitical tensions is a matter of debate.
Yet whether geopolitical analysis played a role in his decision or not, Russia’s invasion of Ukraine resulted in a major spike for General Dynamics.
The defense contractor’s shares soared from $215 per share, to as much as $254.99 per share on the news. Since then, the sector has pulled back, as speculation over whether this crisis will result in increased U.S. and European defense spending has cooled down. It trades closer to $227 today.
It’s also possible that Burry sold into strength during this rally. Unlike other much-followed investors such as Warren Buffett, Burry isn’t afraid to take the money and run. Even if, as with GameStop (NYSE:GME), this has resulted in him“missing out“ on even more epic gains.
Of course, it’s doubtful GD stock is going to surge on a meme wave anytime soon. Now trading for around 19x earnings, it now sports a still-reasonable, but not necessarily “cheap” valuation.
If you’re bullish on the Russia/Ukraine crisis, and/or the rising tensions between the U.S. and China driving up defense spending, you may want to consider it. Just don’t be surprised if it turns out Burry has already cashed out.
Geo Group (GEO)
Source: JosephRouse / Shutterstock.com
As discussed above, both U.S.-based private prison operators remain Michael Burry stocks. Yet Burry has trimmed his position in Geo Group while adding to his CoreCivic position.
The reason for this? Like CXW stock, GEO stock is cheap. Still operating as a REIT, it trades at a low price-to-funds from operations (P/FFO) ratio of 3.3x. But unlike its counterpart, this out-of-favor stock has a lot more fleas. At least, that’s how the “smart money” sees it.
Although this figure has come down since last summer, short interest still runs high with Geo Group. As of Feb. 28, 28.4% of its outstanding float was sold short. This mainly was driven by concern over its ability to refinance its debt. Investors worry that if it loses its U.S. Federal Government business it may have a tough time servicing its debt.
This helps to explain why Burry is practicing some risk management, and lowering the size of his GEO stock wager. However, risky as it may be, it may be worth still holding it.
If the company’s restructuring (which includes converting back to a C-Corp) works out, this low-priced stock (at around $5.50 per share today) could zoom back to double-digit prices.
Imperial Brands (IMBBY)
Source: Shutterstock
Along with six U.S.-listed stocks, Michael Burry holds a smattering of foreign stocks in his portfolio.
This includes shares in several names based in Japan and South Korea. It also includes quite a few U.K.-based stocks.
One of the best known, and one that makes up a large allocation in the Scion portfolio, is Imperial Brands. The global tobacco giant, which in the U.S. sells Winston cigarettes, Dutch Masters cigars, and Blu e-cigarettes, has sold off recently. The market has been more skeptical about its ability to adapt to changes in the global tobacco market.
Namely, observers question the company’s ability to transition from analog tobacco products to next-generation smoke-free tobacco-free products. Names like Philip Morris International (NYSE:PM) and its former corporate parent Altria Group (NYSE:MO) appear better adapted to make this leap.
However, these worries about a future without cigarettes may work to its advantage in the here-and-now.
At present, Imperial continues to make a lot of money from the sale of cigarettes. Trading for less than 5x earnings, and paying out a 9.32% dividend, this British-based tobacco purveyor may be a great defensive play to hold while markets stay volatile. It could also produce solid returns in the years ahead.
Michael Burry Stocks: AEA-Bridges Impact (IMPX)
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AEA-Bridges Impact is aspecial purpose acquisition company (SPAC). It’s in the process of taking Harley Davidson’s (NYSE:HOG) electric motorcycle unit, LiveWire, public.
IMPX stock briefly went above its original offering price ($10 per share) when the deal was announced Dec. 13. Since then, the SPAC has drifted back to just below the $10 mark. So, why does Burry hold this in his portfolio? After all, he tends to be bearish on rich stock market valuations and used to have a big bet against Tesla.
Yes, both these things are true, but Burry’s bet on AEA-Bridges may not be as out-of-a-character as it seems. As a Seeking Alpha commentator discussed when breaking down Scion portfolio changes, this is a “heads I win, tails I don’t lose” wager.
The commentator further speculates Burry is in it as a SPAC arbitrage play, not so much an indication this value investor believes this deal undervalues LiveWire. The takeaway is that Burry may just be using it as a vehicle to park money and earn a tiny positive return.
You may not want to piggyback this one. Especially as it trades for just 9 cents below its $10 per share redemption price.
On the date of publication, Thomas Niel held long positions in CXW, GEO, and MO. He did not have (either directly or indirectly) any positions in any other securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to theInvestorPlace.comPublishing Guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.
