In this article, we discuss the 10 best stocks to buy according to Michael Burry. If you want to skip our detailed analysis of these stocks, go directly to the 5 Best Stocks to Buy According to Michael Burry.
Michael Burry, the chief of California-based Scion Asset Management, manages more than $2 billion in assets with investments concentrated in the consumer goods, services, and technology sectors. The top five holdings of his hedge fund, according to the latest data filed with the regulatory body at the end of June 2021, represent more than 38% of the entire portfolio, with technology companies like Facebook, Inc. (NASDAQ: FB) and Alphabet Inc. (NASDAQ: GOOG) topping the list alongside retail giant Walmart Inc. (NYSE: WMT).
Six of the top ten holdings in the portfolio are new additions. Coupled with the fact that Burry sold off stakes in 14 companies between March and June this year, most of which featured in the top picks of the hedge fund during the first quarter of 2021, it would appear that the famed investor is embarking on a new investment strategy to cater to the changing market dynamics following mass COVID-19 vaccinations. A cursory glance at the portfolio indicates Burry has been loading up on technology and shipping stocks while selling energy-related equities.
The top investment picks of Burry are a good indicator of his overall view on the economy. The investor has become one of the most famous personalities on Wall Street by banging on the inflation drum – some of his most famous crash predictions can be accessed here. During the 2008 financial crisis, he made billions by betting against subprime mortgages, a feat that later inspired a Hollywood film as well. Bury has a net worth of $300 million and his hedge fund has a ten-year return of 326%, one of the most successful on Wall Street.
The success of Burry is an exception in the world of finance that has struggled to cope with technological disruption. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Michael Burry of Scion Asset Management
Our Methodology
With this context in mind, here is our list of the 10 best stocks to buy according to Michael Burry. These were listed according to the investment portfolio of Scion Asset Management at the end of the second quarter of 2021. The number of hedge holders in each company are mentioned alongside other details, like analyst ratings and basic business fundamentals, for further clarity. Data from the 873 hedge funds tracked by Insider Monkey was used for this purpose.
Best Stocks to Buy According to Michael Burry
10. The GEO Group, Inc. (NYSE: GEO)
Number of Hedge Fund Holders: 15
The GEO Group, Inc. (NYSE: GEO) is placed tenth on our list of 10 best stocks to buy according to Michael Burry. The firm operates as a real estate investment trust and is based in Florida. Latest filings reveal that Scion Asset Management owned 2.5 million shares in the company at the end of June 2021 that are worth $17.8 million. This represents 0.85% of the investment portfolio of the Burry-led firm. The GEO Group is a new addition to the portfolio compared to the previous quarter.
On June 8, investment advisory Wedbush initiated coverage of The GEO Group, Inc. (NYSE: GEO) stock with a Neutral rating and a price target of $7. Henry Coffey, an analyst at the firm, issued the ratings update.
At the end of the second quarter of 2021, 15 hedge funds in the database of Insider Monkey held stakes worth $74 million in The GEO Group, Inc. (NYSE: GEO), up from 13 in the previous quarter worth $72 million.
Just like Facebook, Inc. (NASDAQ: FB), Alphabet Inc. (NASDAQ: GOOG), and Walmart Inc. (NYSE: WMT), The GEO Group, Inc. (NYSE: GEO) is one of the best stocks to buy according to Michael Burry.
In its Q1 2021 investor letter, Miller Value Partners, an asset management firm, highlighted a few stocks and The GEO Group, Inc. (NYSE: GEO) was one of them. Here is what the fund said:
“GEO Group (GEO) declined 9.8% during the period as President Biden’s Executive Order directing the Department of Justice not to renew contracts with private prisons at the Federal level offset solid Q4 results. GEO reported Q4 revenue of $578.1M, in-line with consensus while EBITDA of $107.9M topped estimates of $87.7M by 23%. Adjusted Funds from Operations (AFFO) of $0.62/share fell 6% Y/Y and provided coverage of 2.5x on the quarterly dividend of $0.25/share (13.5% annualized yield). The company exited the quarter with ample liquidity of $420M and remains committed to paying down $75M-$100M of debt annually. Management introduced 2021 guidance with revenue of $2.24Bn-$2.27Bn, EBITDA of $386M-$400M, and AFFO of $1.98-$2.08, all of which assumes Bureau of Prison contracts with optional expiration periods in 2021 will not be renewed. Additionally, GEO announced a $200M convertible notes offering due 2026 with net proceeds funding the redemption of the 5.875% unsecured notes due 2022.”
9. Ovintiv Inc. (NYSE: OVV)
Number of Hedge Fund Holders: 40
Ovintiv Inc. (NYSE: OVV) is ranked ninth on our list of 10 best stocks to buy according to Michael Burry. The company develops, producers, and markets oil and natural gas. It is headquartered in Colorado. Latest data shows that Scion Asset Management owned 600,000 shares in the company at the end of the second quarter of 2021. This represents 0.9% of the portfolio and is worth $18.8 million. This is also another new addition to the portfolio compared to the first quarter of 2021.
On August 17, investment advisory Bank of America reinstated coverage of Ovintiv Inc. (NYSE: OVV) stock with a Buy rating and a price target $38, noting that the firm had a line of sight to accelerate debt reduction that will transfer value to the equity.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Two Sigma Advisors is a leading shareholder in Ovintiv Inc. (NYSE: OVV) with 3.9 million shares worth more than $123 million.
In addition to Facebook, Inc. (NASDAQ: FB), Alphabet Inc. (NASDAQ: GOOG), and Walmart Inc. (NYSE: WMT), Ovintiv Inc. (NYSE: OVV) is one of the best stocks to buy according to Michael Burry.
In its Q4 2020 investor letter, Davis Funds, an asset management firm, highlighted a few stocks and Ovintiv Inc. (NYSE: OVV) was one of them. Here is what the fund said:
“Energy holdings in Ovintiv also experienced detracted performance, as oil demand collapsed due to the pandemic. With approximately 70% of oil demand used for transportation, the decline in miles driven (i.e., U.S. miles driven are down 11% in 2020) and the far bigger 60–70% decline in global air passenger traffic led to a dramatic drop in oil prices.
It is our expectation that oil demand will remain weak for the foreseeable future, as flying and driving slowly recover, and that over the long term, electric vehicles and renewable energy will also decrease demand for fossil fuels. As a result, we sold out of our energy positions in 2020. We redeployed the assets in other sectors such as financial services that also saw falling stock prices, but where we had stronger conviction that the long-term health of their business was strong.”
8. Discovery, Inc. (NASDAQ: DISCA)
Number of Hedge Fund Holders: 44
Discovery, Inc. (NASDAQ: DISCA) is a New York-based media company. It is placed eighth on our list of 10 best stocks to buy according to Michael Burry. Regulatory filings by Scion Asset Management reveal that the firm owned 855,084 shares in the media company at the end of June 2021. These are worth $24.7 million and represent 1.19% of the portfolio. The investment firm bought stakes in the company between April and June, according to the filings.
On August 4, investment advisory Deutsche Bank kept a Buy rating on Discovery, Inc. (NASDAQ: DISCA) stock but lowered the price target to $40 from $55, forecasting lower domestic network affiliate revenue for the firm in the second quarter.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm DE Shaw is a leading shareholder in Discovery, Inc. (NASDAQ: DISCA) with 5.6 million shares worth more than $165 million.
Along with Facebook, Inc. (NASDAQ: FB), Alphabet Inc. (NASDAQ: GOOG), and Walmart Inc. (NYSE: WMT), Discovery, Inc. (NASDAQ: DISCA) is one of the best stocks to buy according to Michael Burry.
In its Q1 2021 investor letter, Mayar Capital, an asset management firm, highlighted a few stocks and Discovery, Inc. (NASDAQ: DISCA) was one of them. Here is what the fund said:
“We also sold most of our holdings in Discovery as the stock price continued to increase to new highs. However, in late March the stock declined considerably when brokers liquidated holdings by Archegos Capital (see above in General Commentary) to satisfy margin calls. That brought the stock price down to levels that we found attractive, and we bought back a significant amount of the shares that we had sold earlier that month.”
7. CVS Health Corporation (NYSE: CVS) CALL
Number of Hedge Fund Holders: 67
CVS Health Corporation (NYSE: CVS) is a Rhode Island-based health service provider. It is ranked seventh on our list of 10 best stocks to buy according to Michael Burry. Scion Asset Management owned 525,300 shares in the health company at the end of June 2021, representing 2.1% of the portfolio. These shares are worth $43.8 million. Burry increased the stake of the investment firm in CVS Health by 32% in the second quarter when compared to the first quarter of the year.
On August 5, investment advisory Deutsche Bank maintained a Buy rating on CVS Health Corporation (NYSE: CVS) stock and raised the price target to $101 from $95, appreciating the solid second quarter results from the firm.
Out of the hedge funds being tracked by Insider Monkey, Chicago-based firm Harris Associates is a leading shareholder in CVS Health Corporation (NYSE: CVS) with 8.5 million shares worth more than $713 million.
Facebook, Inc. (NASDAQ: FB), Alphabet Inc. (NASDAQ: GOOG), and Walmart Inc. (NYSE: WMT) are some of the best stocks to buy according to Michael Burry., along with CVS Health Corporation (NYSE: CVS).
In its Q1 2021 investor letter, Vulcan Value Partners, an asset management firm, highlighted a few stocks and CVS Health Corporation (NYSE: CVS) was one of them. Here is what the fund said:
“We sold our position in CVS Health Corp. to allocate capital to companies with larger margins of safety. During the five years that we owned CVS Health Corp., the company acquired Aetna. At the time, we also owned Aetna, and we believed the combination of the two companies would create additional value. After the acquisition, its business performance has been disappointing. We reevaluated our assumptions and determined its value has not grown.”
6. Cardinal Health, Inc. (NYSE: CAH) CALL
Number of Hedge Fund Holders: 40
Cardinal Health, Inc. (NYSE: CAH) is placed sixth on our list of 10 best stocks to buy according to Michael Burry. The firm provides healthcare services and products. It operates from Ohio. Burry-led Scion Asset Management owned 857,700 shares in the company at the end of the second quarter of 2021. These are worth $48.9 million and represent 2.35% of the portfolio. According to the latest data, this is a new addition to the portfolio of the investment firm when compared to the first quarter of 2021.
In earnings results for the fourth fiscal quarter, posted on August 5, Cardinal Health, Inc. (NYSE: CAH) reported earnings per share of $0.77, missing market estimates by $0.43. The revenue over the period was $42 billion, up 16% year-on-year and beating estimates by $2.3 billion.
At the end of the second quarter of 2021, 40 hedge funds in the database of Insider Monkey held stakes worth $897 million in Cardinal Health, Inc. (NYSE: CAH), up from 39 in the previous quarter worth $967 million.
Facebook, Inc. (NASDAQ: FB), Alphabet Inc. (NASDAQ: GOOG), and Walmart Inc. (NYSE: WMT) are some of the best stocks to buy according to Michael Burry., just like Cardinal Health, Inc. (NYSE: CAH).
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Disclosure. None. 10 Best Stocks to Buy According to Michael Burry is originally published on Insider Monkey.
