Michael Burry – the hedge fund manager portrayed by Christian Bale in The Big Short – has invested 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 was selling most of his stock portfolio and calling for the “mother of all crashes.”
Not exactly bullish on the overall market, he recently issued a stark warning about the current earnings season being relatively positive.
“These earnings reports and by Jove all season have a ‘Last Hurrah’ feel to them,” Burry wrote in a since-deleted tweet.
But the man who shorted the US housing market — and won — clearly sees pockets of opportunity.
Meta Platforms (META) and Alphabet (GOOG)
Burry’s bet on big tech is clearly remarkable.
Technology and growth stocks have been out of favor for nearly half a year. Adding these two stocks to the portfolio for the first time is a contrarian move. Burry’s portfolio now includes 6,500 shares of Google parent Alphabet Inc. and 80,000 shares of Meta Platforms Inc., the parent company of Facebook. It is his fourth and sixth longest innings, respectively.
The move could be seen as a vote of confidence in digital advertising. It could also be a sign of underestimation. Both stocks trade at around 14 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’s stock in the first quarter.
The stock holding trades at a price-to-free cash flow ratio of 18. That means the cash flow yield is as high as 5.6%. As international borders reopen and lockdowns ease, booking could be an ideal bet for the global travel recovery.
Burry bought a lot of tech stocks this quarter, but that shouldn’t suggest he’s bullish on the industry as a whole. Tucked away in the 13F filing was a huge short bet against Apple.
It reported 206,000 put options on Apple stock as of the end of the 1st quarter. The notional value of this bet is approximately $33 million. However, the actual cost could be much lower given the way option premiums are priced.
However, it is curious that one of the world’s most famous short-sellers is targeting one of the world’s most valuable companies. Apple has lost about 12% of its value year to date. Supply chain disruptions in China combined with weakening consumer purchasing power could affect Apple in the short term.
The stock is also trading at a relatively high valuation. Apple shares are trading at a price-to-earnings ratio of 26 — significantly higher than 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 created a global content juggernaut. This conglomerate owns rights to iconic characters such as Batman, sports channels in Europe, HBO and CNN.
The stock is down about 40% on concerns about debt and the competitive landscape for online streaming. However, the company expects to generate $3.65 in free cash flow per share by next year, which would imply an FCF yield of 24% at current market value.
That could be why Burry made such a big bet on it.
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