In this article, we discuss the 5 stocks that Michael Burry is selling. If you want to read about some more stocks that Burry is selling, go directly to Michael Burry Is Selling These 3 Stocks.
When it comes to recessions and profiting from an economic crisis, there is perhaps no other hedge fund manager on Wall Street that commands as much attention as Michael Burry, the chief of Scion Asset Management, a hedge fund with a portfolio value of $74 million at the end of the fourth quarter of 2021. Burry is a legendary investor who made record profits in the financial meltdowns of 2000 and 2008, accurately predicting the dotcom and housing crashes. As a recession looms large over the market again, Burry is once again in the spotlight.
The latest Burry saga begins in early 2021, just as the stock market was booming in light of easing virus restrictions and the reopening of the economy. Burry had warned that the boom was only temporary, predicting the “mother of all crashes” and comparing the soaring valuations in the technology sector to the dotcom and housing bubbles. He proceeded to repeat the same warnings through the year. His hedge fund activity was reflective of his thoughts as well as he reduced the stocks in the Scion portfolio from 20 to just 6 in the third quarter of 2021.
In late 2021, as inflation soared due to supply chain problems and increased demand for goods and services, the central bank hinted at raising the interest rate to curb skyrocketing prices. This led to a mass sell-off in the technology sector at the turn of the year. As the Fed prepares for even more rate hikes in 2022, several market experts are now predicting that the economy could go into a deep recession by 2023. Burry has said that the Fed has “no intention of fighting inflation” and the rate hikes are “getting elevation before stocks and the consumer tap out”.
Burry Cheers Musk, Warns of Great Depression
The chief of Scion Asset Management, who held large stakes in companies like Alphabet Inc. (NASDAQ:GOOG), Meta Platforms, Inc. (NASDAQ:FB), and Discovery, Inc. (NASDAQ:DISCA) during the past year, also addressed famous tech-related names like Tesla, Inc. (NASDAQ:TSLA), Netflix, Inc. (NASDAQ:NFLX), and Twitter, Inc. (NYSE:TWTR) in his tweets. In a series of tweets, which have been deleted in typical Burry fashion merely hours after they were sent, the hedge fund manager noted that Tesla, Inc. (NASDAQ:TSLA) rivals would catch up to the firm, pointing to Netflix, Inc. (NASDAQ:NFLX) as an example to back his assertion.
Streaming giant Netflix, Inc. (NASDAQ:NFLX) reported disappointing first quarter earnings last month and also disclosed that it was losing subscribers, sending a shockwave down the entertainment industry and leading to a dramatic drop in the share price. Burry claimed that the “the competition came for Netflix just like the competition is coming for Tesla” in a tweet. Burry had shorted hundreds of millions worth of Tesla, Inc. (NASDAQ:TSLA) stock last year and engaged in a public battle with Tesla, Inc. (NASDAQ:TSLA) founder Elon Musk. The latter referred to the former as a “broken clock” in a tweet in November 2021.
More recently, Burry has cheered on Musk and his recent decision to purchase social networking platform Twitter, Inc. (NYSE:TWTR). In a since deleted tweet from late April, Burry said that “Musk taking control of Twitter after pledging to prioritize free speech would be good for the US” and that Twitter, Inc. (NYSE:TWTR) had previously “restricted the sharing of disputed news reports that were later verified”. Burry has also compared the bulls at the market to the reporters sharing positive news about the stock market a day before it crashed, leading to the Great Depression of the 1929.
Michael Burry of Scion Asset Management
Our Methodology
The stocks were picked from the fourth quarter regulatory filings of Scion Asset Management. Companies in which Scion trimmed or sold off a previously-held stake in the fourth quarter of 2021 feature on the list.
Michael Burry Is Selling These Stocks
5. The GEO Group, Inc. (NYSE:GEO)
Number of Hedge Fund Holders: 16
The GEO Group, Inc. (NYSE:GEO) is a real estate investment trust with core interests in secure facilities. Scion had first bought a stake in the firm in late 2020 comprising 845,000 shares purchased at an average price of $9.59 per share. This stake was sold off in the next quarter. A new position was then opened in the second quarter of 2021 consisting of 2.5 million shares bought at an average price of $6.30 per share. Burry then proceeded to slash this position gradually in the coming months, selling off 27% of the stake in the fourth quarter of 2021.
The GEO Group, Inc. (NYSE:GEO) recently posted earnings for the first quarter of 2022, reporting a revenue of more than $551 million, down 4% compared to the revenue over the same period last year and in line with market expectations.
At the end of the fourth quarter of 2021, 16 hedge funds in the database of Insider Monkey held stakes worth $69 million in The GEO Group, Inc. (NYSE:GEO), the same as in the previous quarter worth $72 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 Alphabet Inc. (NASDAQ:GOOG), Meta Platforms, Inc. (NASDAQ:FB), and Discovery, Inc. (NASDAQ:DISCA), The GEO Group, Inc. (NYSE:GEO) is one of the stocks on the radar of elite investors.
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:
“The GEO Group, Inc. (NYSE: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. The GEO Group, Inc. (NYSE: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, The GEO Group, Inc. (NYSE:GEO) announced a $200M convertible notes offering due 2026 with net proceeds funding the redemption of the 5.875% unsecured notes due 2022.”
4. CVS Health Corporation (NYSE:CVS)
Number of Hedge Fund Holders: 71
CVS Health Corporation (NYSE:CVS) provides healthcare services. Scion first bought a stake in the firm during the third quarter of 2020 consisting of around 150,000 shares purchased at an average price of $62.22 per share. This holding was sold off in the next quarter. At the start of 2021, Burry opened a new position in the stock comprising 110,000 shares bought at an average price of $72.84 per share. This holding was added to in the coming quarters as the share price of the company soared. In the fourth quarter, the holding was sold off entirely.
On April 7, Tigress Financial analyst Ivan Feinseth kept a Buy rating on CVS Health Corporation (NYSE:CVS) stock and raised the price target to $125 from $122, noting that a new growth strategy and retail store service would drive shareholder returns for the firm in the long-term.
Among the hedge funds being tracked by Insider Monkey, Chicago-based firm Harris Associates is a leading shareholder in CVS Health Corporation (NYSE:CVS) with 7.1 million shares worth more than $734 million.
At the end of the fourth quarter of 2021, 71 hedge funds in the database of Insider Monkey held stakes worth $1.9 billion in CVS Health Corporation (NYSE:CVS), compared to 61 in the previous quarter worth $1 billion.
In addition to Alphabet Inc. (NASDAQ:GOOG), Meta Platforms, Inc. (NASDAQ:FB), and Discovery, Inc. (NASDAQ:DISCA), CVS Health Corporation (NYSE:CVS) is one of the stocks that hedge funds have their eye on.
In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and CVS Health Corporation (NYSE:CVS) was one of them. Here is what the fund said:
“Improving health remains a key impact theme for the portfolio, and over the past year or so we have increased our exposure to the health care sector, through the addition of CVS Health Corporation (NYSE:CVS), which is well-positioned to help define the future of health care in terms of costs, quality and convenience.”
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Disclosure. None. Michael Burry Is Selling These 5 Stocks is originally published on Insider Monkey.
