In this article, we discuss 6 best stocks to buy according to Michael Burry. If you want to skip our detailed analysis of these stocks, go directly to 3 Best Stocks to Buy According to Michael Burry.
Michael Burry stirred a lot of controversy last year after he used social networking platform Twitter on multiple occasions to predict a market crash long before inflation fears had taken root and sent investors scrambling. The chief of Scion Asset Management was in hot water after he predicted the “mother of all crashes” in March and then again in November. The tweets, since deleted, underlined his skepticism surrounding tech-led disruption. He compared the hype around Bitcoin to the housing bubble of 2007 that had led to a financial crisis in 2009.
The moves of Burry at the market, where he famously made multi-million bearish bets against EV-maker Tesla and the growth-heavy ARK Innovation ETF, served to outline his overall economic outlook as well. During the third quarter of 2021, Burry sold off fourteen of his twenty positions at the stock market, reducing the portfolio value of his fund from over $2 billion to just $41 million. Latest filings show that Burry has used the fourth quarter of 2021 to load up the Scion Asset Management portfolio once again.
Some of the famous names in the Scion portfolio at the end of the fourth quarter of 2021 included CoreCivic, Inc. (NYSE:CXW), AEA-Bridges Impact Corp. (NYSE:IMPX), and General Dynamics Corporation (NYSE:GD), among others discussed in detail below.
Our Methodology
The stocks were picked from the fourth quarter regulatory filings of Scion Asset Management. The hedge fund sentiment around each stock was calculated using the data of 867 hedge funds tracked by Insider Monkey in Q3 2021.
Michael Burry of Scion Asset Management
Best Stocks to Buy According to Michael Burry
6. The GEO Group, Inc. (NYSE:GEO)
Number of Hedge Fund Holders: 16
The GEO Group, Inc. (NYSE:GEO) is a real estate investment trust that owns and runs secure facilities. Burry first purchased a stake in the company during the fourth quarter of 2020, buying around 845,000 shares at an average price of $9.59 per share. He sold off this stake completely in the following quarter. The investor then opened a new position in the company during the second quarter of 2021, buying 2.5 million shares at an average price of $6.30 per share. He has since proceeded to reduce that stake by 53% and 26% in the following quarters.
Latest filings show that Scion Asset Management owned 850,000 shares of The GEO Group, Inc. (NYSE:GEO) at the end of the fourth quarter of 2021 worth $6.5 million, representing 8.84% of the total portfolio.
At the end of the third quarter of 2021, 16 hedge funds in the database of Insider Monkey held stakes worth $72 million in The GEO Group, Inc. (NYSE:GEO), up from 15 in the previous quarter worth $74 million.
Among the hedge funds being tracked by Insider Monkey, Boston-based investment firm Arrowstreet Capital is a leading shareholder in The GEO Group, Inc. (NYSE:GEO), with 2.5 million shares worth more than $20 million.
Just like CoreCivic, Inc. (NYSE:CXW), AEA-Bridges Impact Corp. (NYSE:IMPX), and General Dynamics Corporation (NYSE:GD), The GEO Group, Inc. (NYSE:GEO) is one of the stocks that value investors have their eye on.
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.”
5. Bristol-Myers Squibb Company (NYSE:BMY)
Number of Hedge Fund Holders: 74
Bristol-Myers Squibb Company (NYSE:BMY) makes and sells biopharmaceutical products. The stock is a new addition to the portfolio of Scion Asset Management. The fund purchased 300,000 shares of Bristol-Myers Squibb Company (NYSE:BMY) during the fourth quarter of 2021 at an average price of $58.66 per share. This stake is worth $18.7 million and represents 25.12% of the total portfolio.
At the end of the third quarter of 2021, 74 hedge funds in the database of Insider Monkey held stakes worth $4.7 billion in Bristol-Myers Squibb Company (NYSE:BMY), up from 73 in the preceding quarter worth $5.2 billion.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Two Sigma Advisors is a leading shareholder in Bristol-Myers Squibb Company (NYSE:BMY), with 6.6 million shares worth more than $412 million.
In its Q4 2020 investor letter, Wedgewood Partners, an asset management firm, highlighted a few stocks and Bristol-Myers Squibb Company (NYSE:BMY) was one of them. Here is what the fund said:
“Bristol-Myers Squibb recently reported accelerating sales as much of the medical services industry returned to work. The Company continues to expect double-digit earnings growth over the next few years, driven by existing drugs, in addition to a broad pipeline of new drugs and indications. While the market remains fixated on a couple of patent expirations that could occur over the next several years, we think this is well-known at this point, yet the market still undervalues a couple of key acquisitions the Company has made in the past few years, particularly Celgene, which was acquired for a song.”
4. Fidelity National Financial, Inc. (NYSE:FNF)
Number of Hedge Fund Holders: 32
Fidelity National Financial, Inc. (NYSE:FNF) provides insurance products in the United States. This firm is also a new addition to the Scion Asset Management portfolio. During the fourth quarter of 2021, the fund purchased 325,000 shares of Fidelity National Financial, Inc. (NYSE:FNF) at an average price of $49.74 per share. The stake is worth close to $17 million and represents 22.77% of the total portfolio.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Brave Warrior Capital is a leading shareholder in Fidelity National Financial, Inc. (NYSE:FNF), with 8.6 million shares worth more than $450 million.
At the end of the third quarter of 2021, 32 hedge funds in the database of Insider Monkey held stakes worth $1.39 billion in Fidelity National Financial, Inc. (NYSE:FNF), compared to 34 in the preceding quarter worth $1.30 billion.
Along with CoreCivic, Inc. (NYSE:CXW), AEA-Bridges Impact Corp. (NYSE:IMPX), and General Dynamics Corporation (NYSE:GD), Fidelity National Financial, Inc. (NYSE:FNF) is one of the stocks on the radar of elite investors.
In its Q1 2021 investor letter, Merion Road Capital Management, an asset management firm, highlighted a few stocks and Fidelity National Financial, Inc. (NYSE:FNF) was one of them. Here is what the fund said:
“During the period I added to our position in Fidelity National Financial (“FNF”). FNF is the nation’s largest title insurer with 33% market share. It was built over the last 30 years by Bill Foley, who revolutionized the industry with his emphasis on eliminating bureaucracy, utilizing technology to streamline operations, and maximizing customer service. He is well-regarded as a savvy investor and consummate deal-maker having acquired and divested multiple entities both in title and ancillary fields. He continues to serve as the chairman of FNF with a personal stake in the company worth hundreds of millions.
While title insurance is technically insurance, it is a bit of a unique animal. Being that the insurer writes a policy based on past events, not unknowns in the future, losses are relatively small and predictable. The more data an insurer can analyze, the less likely they are to experience a claim; and the more efficiently they can analyze the data and process the application, the lower their costs will be. FNF has invested in automating its work stream through their ownership of NextAce (automated search), SoftPro (document production and closing), and multiple other cloud-based platforms. Due to these investments, FNF boasts industry leading margins and is able to attract more third party agents who can leverage their service offering.
Last year FNF acquired the outstanding interest in FGL Holdings (“F&G”), a fixed indexed and fixed rate annuity provider. Though this appears to be a financial rather than strategic acquisition, there should be some opportunities to grow the combined business. Notably, the acquisition afforded F&G an improved credit profile which has led to ratings upgrades. These upgrades allow F&G to address new distribution lines, such as in the bank market where FNF has strong relationships through their title and escrow business. The company announced that since launching in July 1st it had already achieved $500mm of sales in this channel (vs. full year sales of ~$4bn).
FNF is likely over-earning right now based on the recent spike in mortgage activity. Looking out to 2022 I estimate that earnings should step down to something a little shy of $5.00/sh. At current prices we are collecting a double digit earnings yield for a business with strong market positioning and a superb capital allocator. Last year they repurchased a bunch of stock in Q1 at depressed prices and have announced their intent to acquire another $500mm over the next 12 months.”
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Disclosure. None. 6 Best Stocks to Buy According to Michael Burry is originally published on Insider Monkey.
