If we look at Michael Burry’s most recent trades, he’s sold 71.5% of his portfolio. The question is, why did he do this…
I’ve been going through quite a few billionaire investors portfolio’s recently and I’ve noticed an alarming pattern. And that pattern is that a lot of them are selling out of their stock positions. Michael Burry, the person who became famous from shorting the 2008 housing bubble, shown in the movie the big short, he’s actually sold out of most of his portfolio. Let’s take a look at this…
In the most recent filings, if you add up all of the stocks that he’s sold, just down that far right hand side, it comes to 71.55% of his total stock portfolio has been sold. That is a lot of selling and it is very rare that you’ll see an investor sell out of so much of his portfolio like that…
So we need to first of all go through all of the stocks that Burry has decided to sell, & secondly we need to figure out why he’s sold so much of his stocks. This is not normal. So we’ll go through the stocks that he decided to sell 100% out of first.
Liberty sirus xm the mass media company, that was entirely sold, worth 0.27% of the portfolio.
Precision drilling again 100% sold worth 1.87% of his portfolio. ROIC
Sold out of completely as well, same with Altria the tobacco company.
Qorvo, Trip.com & CVS health all completely sold worth around 5% of the portfolio.
The next 2 are very interesting, Facebook, obviously the social media giant, Burry no longer wants to have any capital in. And this was a relatively big position 8.5% of his portfolio. He would have sold this between $260 & $290 a share.
And the big one is Gamestop, the stock that Burry originally saw value in at a low share price, before all of the reddit drama, he’s sold 100% out of that position, 1.7 million shares worth. Now moving on to the positions that he’s reduced…
He reduced MSG networks, the radio and television company by 59.4%, discovery networks, he sold out of half of his position.
Western digital he reduced by 40%, Qurate he reduced by 36%, Uniti, 27.5%, RPT realty, 25.9%, Designer brands, he sold out of quarter of his stocks there, all state he reduced by 16.67%, and lastly Kimball international the furniture brand, he sold by 9.09%.
So there we go, finally got through it all. Guy’s that is a lot of selling by the famous investor as we said earlier on 71.55% of his overall portfolio was sold. That’s a total of 18 stocks. This is not something that you see everyday.
So I want to get into the underlying reasons why he’s sold, some of the patterns that I see, and also some of the tactical investments that he has made…
Now the first thing that we have to mention is the danger that Burry see’s right now in the market. Burry see’s a lot of similarities between the housing market that he shorted in 2008 & today’s market…
He said “index fund inflows are now distorting prices for stocks and bonds in much the same way that CDO purchases did for subprime mortgages more than a decade ago. The flows will reverse at some point, and “it will be ugly when they do”.
So basically in the 2008 housing crash, people were able to borrow a lot of money to buy houses, through these subprime mortgages. What this did to the prices of houses, was made them shoot up. And Burry thinks we’re seeing a similar thing today in our stock market. We’re getting passive investing, short-term and new investors entering the market, buying stocks, resulting in them also shooting up in price. Right now we’re at all-time stock market highs, well surpassing prices before the pandemic…
This creates along with a couple of other factors, creates enormous risk of a crash, which may be the answer why Burry has sold so many stocks.
He said on twitter “cause and effect is not always what they seem, but students of the market should study history, and look for correlations or analogies with prior behaviors, given human nature is a constant”.
“This is very much like the bubble in synthetic asset-backed CDOs before the Great Financial Crisis in that price-setting in that market was not done by fundamental security-level analysis”.