New York CNN —
Michael Burry, the “Big Short” investor who became famous for correctly predicting the epic collapse of the housing market in 2008, has bet more than $1.6 billion on a Wall Street crash.
Burry is making his bearish bets against the S&P 500 and Nasdaq 100, according to Security Exchange Commission filings released Monday. Burry’s fund, Scion Asset Management, bought $866 million in put options (that’s the right to sell an asset at a particular price) against a fund that tracks the S&P 500 and $739 million in put options against a fund that tracks the Nasdaq 100.
Burry is using more than 90% of his portfolio to bet on a market downturn, according to the filings.
But Burry appears to have been wavering between bullish and bearish on his stock picks this year. In January, he tweeted a cryptic message to his 1.4 million followers. “Sell,” he wrote. But by the end of March, he backtracked. “I was wrong to say sell.” he wrote.
The S&P 500 and Nasdaq 100 have both notched big gains so far this year. They’re up nearly 16% and 38%, respectively.
In the mid-2000s, Burry was famous for placing a wager against the housing market and profited handsomely from the subprime lending crisis and the collapse of numerous major financial entities in 2008. The event was chronicled by Michael Lewis in his bestseller “The Big Short: Inside the Doomsday Machine” and later adapted into a film where Burry was played by Christian Bale.
Getting out of regional banks and China
Burry’s fund is also getting out of its shares in a number of regional banks – it sold its 150,000 shares of First Republic Bank (FRC) as well as holdings in Huntington Bank PacWest (PACW) and Western Alliance (WAL). It’s unclear whether these sales took place before or after JPMorgan Chase took over First Republic Bank (FRC) in May.
Burry also reversed course on Chinese stocks – selling his shares of JD.com (JD) and Alibaba (BABA) in the second quarter of the year.
A little long
There are some names that Burry and his team at Scion are betting on.
About 6% of the company’s stock portfolio is long and in the second quarter of the year he increased his exposure to the travel and healthcare industry – purchasing shares of Expedia Group (EXPE), MGM Resorts (MGM), CVS (CVS) and Cigna (CI).
Burry also purchased $4.7 million shares worth of CNN parent company Warner Bros. Discovery (WBD) and $3.3 million in online second hand retailer, The RealReal (TRR).
But in financial circles, Michael Burry’s bearish predictions often garner more attention than his optimistic bets.
While one big payoff doesn’t guarantee future returns, Burry does have a strong investment record. Traders following the investments disclosed by Scion’s over the last 3 years (between May of 2020 and May 2023) would have made annualized returns of 56% according to an analysis by Sure Dividend. Over the same period, the S&P 500 had annualized returns of about 12%.
I'm an avid follower of financial markets, investment strategies, and renowned investors, and I'm well-versed in the complexities of financial instruments and market dynamics. With a background in finance and a keen interest in macroeconomic trends, I've closely studied the strategies and decisions of successful investors like Michael Burry.
Michael Burry, often associated with the "Big Short" fame, gained widespread recognition for accurately predicting the housing market collapse in 2008. His recent move to bet over $1.6 billion on a Wall Street crash, as reported by CNN, is a significant development in the financial landscape. This move is reflected in the Security Exchange Commission filings, which detail Burry's bearish positions against the S&P 500 and Nasdaq 100.
Burry's Scion Asset Management executed these bearish bets through substantial investments in put options, which provide the right to sell an asset at a predetermined price. The filings reveal that Scion purchased $866 million in put options against an S&P 500 tracking fund and $739 million in put options against a Nasdaq 100 tracking fund. Notably, Burry is allocating more than 90% of his portfolio to these bearish positions, signaling a strong conviction in his market downturn prediction.
Despite Burry's historical success, there's an interesting twist in his recent sentiments. He displayed a degree of uncertainty by wavering between bullish and bearish stances on his stock picks. In January, he cryptically tweeted "Sell" to his 1.4 million followers, only to backtrack by the end of March, admitting he was wrong to suggest selling.
Burry's fund has also made strategic moves beyond these bearish bets. It has divested from shares in several regional banks, including First Republic Bank, Huntington Bank PacWest, and Western Alliance. Additionally, Burry reversed course on Chinese stocks, selling shares of JD.com and Alibaba in the second quarter of the year.
The article also sheds light on some of the names Burry and his team at Scion are betting on. Approximately 6% of the company's stock portfolio is allocated to long positions. In the second quarter, there was an increased exposure to the travel and healthcare industry, with purchases of shares in Expedia Group, MGM Resorts, CVS, and Cigna. Burry also invested in CNN parent company Warner Bros. Discovery and the online second-hand retailer, The RealReal.
Burry's bearish predictions have historically attracted more attention, but the article emphasizes his strong investment record. Over the last three years (between May 2020 and May 2023), traders following Scion's disclosed investments would have experienced annualized returns of 56%, significantly outperforming the S&P 500's annualized returns of about 12% over the same period, according to an analysis by Sure Dividend.
In conclusion, Michael Burry's recent bet on a Wall Street crash, coupled with his strategic moves in the market, adds a layer of intrigue to his already fascinating investment journey. While past success doesn't guarantee future returns, Burry's track record and the analysis of Scion's disclosed investments underscore the attention and scrutiny surrounding his financial decisions.
