by Riley Cook
Michael Burry, the renowned investor famous for his accurate prediction of the 2008 housing market crash, has placed bets exceeding $1.6 billion on a potential Wall Street downturn. In a recent release of Security Exchange Commission filings, it was revealed that Burry's bearish positions are directed at the S&P 500 and the Nasdaq 100.
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Through his investment firm, Scion Asset Management, Burry procured put options, granting the right to sell an asset at a specific price. These options amount to $866 million against an S&P 500 tracking fund and $739 million against a Nasdaq 100 tracking fund. Astonishingly, over 90% of Burry's portfolio is now dedicated to his pessimistic outlook on the market.
Burry's stance on the market has oscillated this year, initially advising his substantial Twitter following to "Sell" in January. However, he later retracted his statement by the end of March, acknowledging, "I was wrong to say sell."
Contrary to Burry's bearish predictions, both the S&P 500 and Nasdaq 100 have posted substantial gains in 2023, increasing by approximately 16% and 38%, respectively.
In the mid-2000s, Burry gained widespread recognition for his prescient bet against the housing market, which translated into significant profits during the subprime lending crisis and the subsequent collapse of major financial institutions in 2008. Michael Lewis chronicled these events in his best-selling book "The Big Short: Inside the Doomsday Machine," later adapted into a film where Christian Bale portrayed Burry.
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Scion Asset Management has also been active in adjusting its portfolio beyond bearish bets. The fund has divested from various regional banks, including First Republic Bank (FRC), Huntington Bank PacWest (PACW), and Western Alliance (WAL). Burry's position on Chinese stocks has also shifted, as he sold shares of JD.com (JD) and Alibaba (BABA) during the second quarter.
Amidst these changes, Burry's firm has identified opportunities for growth. Approximately 6% of Scion's stock portfolio is devoted to long positions. In the second quarter, Burry's team increased investments in the travel and healthcare sectors, acquiring shares in Expedia Group (EXPE), MGM Resorts (MGM), CVS (CVS), and Cigna (CI). Additional purchases included shares in Warner Bros. Discovery (WBD), the parent company of CNN, and online secondhand retailer The RealReal (TRR).
Although Burry's optimistic bets hold potential, his bearish predictions often garner more attention in financial circles. Nonetheless, Burry's investment track record is notable. An analysis by Sure Dividend indicates that traders who followed Scion's disclosed investments over the past three years would have achieved annualized returns of 56%, significantly surpassing the S&P 500's annualized returns of approximately 12% over the same period.