In this article, we discuss the 5 times Michael Burry’s market crash, other predictions were wrong. If you want to read our detailed analysis of these predictions, go directly to the 10 Times Michael Burry’s Market Crash, other Predictions were Wrong.
5. Hype Drawing in Retail Investors Before Mother of All Crashes
Source: Twitter, June 2021
Last month, just before he deactivated his Twitter account, Burry used Twitter to predict another market crash. He said in a tweet on June 17 that retail investors were being drawn into a speculative market that would lead to the mother of all crashes. He added that when crypto fell from trillions, or meme stocks fell from tens of billions, losses would approach the size of countries. However, this crash, despite the passing of more than four weeks since he made it, is also yet to materialize, with the market continuing to offer investors record returns.
One of the premier holdings of the Burry portfolio is NetApp, Inc. (NASDAQ: NTAP), the cloud services and data management company. At the end of March, Burry had call options on 300,000 NetApp, Inc. (NASDAQ: NTAP) shares worth $21 million.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Renaissance Technologies is a leading shareholder in NetApp, Inc. (NASDAQ: NTAP) with 1 million shares worth more than $75 million.
4. There Cannot be Another Perfect Setup Like GameStop
Source: Twitter, January 2021
Burry also gave his take on the GameStop Corp. (NYSE: GME) rally in January, again using his favorite medium, Twitter, to outline his thoughts on the market. In late January, as GameStop Corp. (NYSE: GME) underwent a short squeeze, Burry predicted that it was a perfect setup and that there would not be another rally like. However, the rally in AMC Entertainment Holdings, Inc. (NYSE: AMC) stock the same month proved Burry wrong. Burry was one of the architects of the GameStop Corp. (NYSE: GME) short squeeze.
Burry has invested heavily in CVS Health Corporation (NYSE: CVS), the Rhode Island-based healthcare firm. Burry has call options on 400,000 CVS Health Corporation (NYSE: CVS) shares that are worth more than $30 million.
At the end of the first quarter of 2021, 62 hedge funds in the database of Insider Monkey held stakes worth $1.3 billion in CVS Health Corporation (NYSE: CVS), up from 56 in the preceding quarter worth $961 million.
In one of its investor letters, VLTAVA Fund highlighted a few stocks and CVS Health Corp (NYSE:CVS) is one of them. Here is what VLTAVA Fund said:
“During the past quarter, we acquired one new position, CVS Health Corporation. It is a relatively large American company with sales around the same level as Apple. CVS is a health care company. To put it simply, its business can be divided into three areas: a retail pharmacies chain, pharmacy benefit management services, and health insurance.
We have been following CVS for a long time. We began monitoring the company more closely in 2018, when CVS acquired the health insurance company Aetna, a direct competitor of Humana, into which we first invested in 2009. We like CVS’s new integrated business model, but, as tends to be the case with such a large acquisition, it often brings with it some problems. In most cases, acquisitions prove to be overpriced and come with large debt and integration issues. We decided to wait and see how things developed. Now, two years later, integration has not caused fundamental problems, the debt has been declining rather quickly, and the cost of the acquisition has long been reflected in the stock price. Today that price is around the same level as it was in 2013 and meanwhile the earnings per share have doubled. We acquired CVS at 7.5 times this year’s earnings and with a double-digit free cash flow return.”
3. Prepare for Inflation, Bitcoin and Gold at Risk
Source: Twitter, February 2021
Just as the vaccine rollout allowed for the partial reopening of the economy and buoyed investors, Burry was there to spoil the party again. He tweeted in February that investors should prepare for inflation where hedges like Bitcoin and gold would be at risk. He also said that governments would move to squash competitors in the currency arena during an inflationary scenario, hinting that Bitcoin could be at risk. This prediction only turned out to be partially true.
Although Beijing has cracked down on crypto in China, resulting in a dramatic drop in the prices of cryptocurrencies, there has been positive news on the crypto front as well, with El Salvador adopting Bitcoin as legal tender. In terms of inflation, even though market fears in this regard continue to persist, Federal Reserve Chair Jerome Powell on June 23 told lawmakers that problems like rise in demand for goods and supply chain problems would resolve in the near-term and ease inflation-related pressures.
Burry holds a large stake in The Kraft Heinz Company (NASDAQ: KHC), the food company that operates from Chicago. At the end of the first quarter of 2021, Burry had call options on more than 1.1 million The Kraft Heinz Company (NASDAQ: KHC) shares worth close to $47 million.
Out of the hedge funds being tracked by Insider Monkey, Nebraska-based investment firm Berkshire Hathaway is a leading shareholder in The Kraft Heinz Company (NASDAQ: KHC) with 325 million shares worth more than $13 billion.
In its Q4 2020 investor letter, Berkshire Hathaway, an asset management firm, highlighted a few stocks and The Kraft Heinz Company (NASDAQ: KHC) was one of them. Here is what the fund said:
“We exclude our Kraft Heinz holding — 325,442,152 shares — (In the list of 15 common stock investments that at yearend were our largest in market value) because Berkshire is part of a control group and therefore must account for that investment using the “equity” method. On its balance sheet, Berkshire carries the Kraft Heinz holding at a GAAP figure of $13.3 billion, an amount that represents Berkshire’s share of the audited net worth of Kraft Heinz on December 31, 2020.
Berkshire and its subsidiaries hold investments in certain businesses that are accounted for pursuant to the equity method. Currently, the most significant of these is our investment in the common stock of The Kraft Heinz Company (“Kraft Heinz”). Kraft Heinz is one of the world’s largest manufacturers and marketers of food and beverage products, including condiments and sauces, cheese and dairy, meals, meats, refreshment beverages, coffee and other grocery products. Berkshire currently owns 325,442,152 shares of Kraft Heinz common stock representing 26.6% of the outstanding shares…(Click here to see the full text).
2. Robinhood Leading to Gamification of Stocks
Source: Twitter, February 2021
With the rise of retail investor interest in stocks, Robinhood, the trading application, has registered remarkable user growth over the past few months. However, just as meme stocks were becoming a topic of discussion early this year, Burry took to Twitter to outline his view on the application, saying that he believed it had led to the gamification of stocks and comparing it to a fun for all ages casino. Despite this bleak outlook, Robinhood has continued to soar and plans to go public soon at a $40 billion valuation.
One of the top holdings in the Burry portfolio is Facebook, Inc. (NASDAQ: FB), the tech firm that owns popular social platforms like Instagram and WhatsApp. At the end of March, the Scion chief had call options on 550,000 Facebook, Inc. (NASDAQ: FB) shares worth $161 million.
At the end of the first quarter of 2021, 257 hedge funds in the database of Insider Monkey held stakes worth $40 billion in Facebook, Inc. (NASDAQ: FB), up from 242 in the preceding quarter worth $38 billion.
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Facebook, Inc. (NASDAQ: FB) was one of them. Here is what the fund said:
“We continued to keep our learnings from 2020 in mind during the quarter as we sought to increase the up capture of the portfolio. We also made adjustments to the portfolio’s top 10 holdings to increase the participation of select stocks, including Facebook, while trimming our weighting to stable names, which now represent 47% of the portfolio. Our repositioning has been encouraging so far with the portfolio performing better on up days in the market while maintaining good down capture during more turbulent sessions.”
1. Companies Going Public Through SPACs Lack Quality
Source: Twitter, March 2021
Burry also took a swipe at special purpose acquisition companies in March this year, tweeting that even though SPACs were hotter than ever in the world of finance, the companies that went public through them were not well vetted. He even added that anyone could start an SPAC and get wealthy from it, regardless of the quality of the firm going public. Despite this bear outlook, SPACs have continued to facilitate some of the largest public offerings this year, with many under agreements with lucrative startups in growth areas in the coming months as well.
Burry holds a large stake in Alphabet Inc. (NASDAQ: GOOG), the California-based technology firm. At the end of March, Burry had call options on 80,000 Alphabet Inc. (NASDAQ: GOOG) shares worth more than $165 million.
Out of the hedge funds being tracked by Insider Monkey, London-based investment firm TCI Fund Management is a leading shareholder in Alphabet Inc. (NASDAQ: GOOG) with 2.9 million shares worth more than $6 billion.
In its Q1 2021 investor letter, Artisan Partners, an asset management firm, highlighted a few stocks and Alphabet Inc. (NASDAQ: GOOG) was one of them. Here is what the fund said:
“Large-cap tech companies have been resilient through the pandemic—Alphabet among them. A top contributor, Alphabet’s Play Store and Google Cloud are in demand as businesses accelerate online activity which, along with strong YouTube user growth, is helping stabilize temporarily weaker search ad revenue trends. Through the lens of our disciplined bottom-up research process, we view Alphabet as one of the best businesses in the world, capable of expanding revenues at a rapid rate for years to come, with a bullet proof balance sheet and an average asking price. It’s a name we’ve owned since 2012 and for which we continue to have high hopes regarding future prospects.”
You can also take a peek at Michael Burry’s New Stock Picks and Michael Burry is Shorting Tesla and Buying These 10 Stocks Instead.
