Michael Burry – the hedge fund manager portrayed by Christian Bale in The Big Short – has been investing aggressively during this market downturn.
Burry’s latest 13F filing for the first quarter of 2022 shows a wide range of new investments and some interesting strategic moves with options. That’s a significant change from the previous quarter, when Burry sold most of its stock portfolio and called the “mother of all crashes.”
He’s not exactly bullish in the overall market, issuing a serious inflation warning recently.
“Transient, no. Peak, no. To the moon? If you mean a dark, cold place,” Burry wrote in a since-deleted tweet.
But the man who shorted the US housing market – and won – clearly sees pockets of opportunity.
Metaplatforms (META) and Alphabet (GOOG)
Burry’s bet on big tech is clearly remarkable.
Tech and growth stocks have been out of favor for nearly six months. Adding these two stocks to the portfolio for the first time is a contrarian decision. Burry’s portfolio now includes 6,500 shares of Google parent Alphabet Inc. and 80,000 shares of Meta Platforms Inc., Facebook’s parent company. These are his fourth and sixth largest holdings, respectively.
This decision could be seen as a vote of confidence in digital advertising. It could also be a signal of undervaluation. The two stocks trade at around 13 and 20 times forward earnings, respectively.
Travel website Booking.com is now the second largest holding in Burry’s Scion Asset Management portfolio. He bought 8,000 shares of the company in the first quarter.
The reservation stock is trading at a price to free cash flow ratio of 17. This means that the cash flow yield is 5.9%. As international borders reopen and lockdowns ease, Booking could be an ideal bet on the rebound in global travel.
Burry has bought plenty of tech stocks this quarter, but that shouldn’t suggest he’s bullish on the broader sector. Hidden in the 13F folder was a huge short bet against Apple.
He netted 206,000 put options on Apple stock at the end of the first quarter. The notional value of this bet is approximately $28 million. However, the actual cost could be much lower given the option premium pricing.
Still, it’s surprising that one of the world’s most famous short sellers is targeting one of the world’s most valuable companies. Apple has lost about 18% of its value since the start of the year. Supply chain disruptions in China, coupled with weakening consumer purchasing power, could impact Apple in the near term.
The stock is also trading at a relatively high valuation. Apple shares are trading at a price-earnings ratio of 22, well above the historical average of 15.
Warner Brothers Discovery (WBD)
Media giant Warner Brothers Discovery is now the third largest holding in Burry’s portfolio. It added 750,000 shares in the first quarter.
The merger of Discovery and Warner Media has created a global content juggernaut. This conglomerate owns the rights to iconic characters including Batman, sports channels in Europe, HBO and TAUT.
The stock is down around 44% on concerns over debt and the competitive landscape of online streaming. However, the company expects to generate $3.65 of free cash flow per share by next year, which would imply a 26% FCF return at current market value.
That might be why Burry made such a big bet on it.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.