The Big Short’s Michael Burry Reveals His New Stock Picks

Michael Burry is one of the most well known hedge fund managers outside finance circles. Here is what we said about him in our previous article:

“Despite being one of the few prominent investors in the world to recognize the bubble brewing in the subprime mortgage markets and the crisis it would lead to when it burst, Michael Burry received only limited recognition for his talent until renowned writer Michael Lewis of ‘Moneyball’ fame wrote about Mr. Burry’s journey in the 2010 bestseller ‘The Big Short: Inside the Doomsday Machine’. That recognition has turned into even greater fame more recently after the release of the movie by the same name, in which Mr. Burry is played by star actor Christian Bale. As the ending of the movie showed, even after making outsized gains during the financial crisis, Mr. Burry soon closed his hedge fund, Scion Capital LLC, due to the continuous redemption pressure he faced from his investors while betting against the housing market. However, what the movie didn’t show was that Mr. Burry has been back in the game since 2013.”

He is indeed back in the game and betting on a small number of stocks. Consumer staples stocks account for 37% of his portfolio while information technology stocks constitute 33% of its holdings.

During the quarter ended September, 2016, the fund initiated positions in several stocks such as Coty Inc. (NYSE:COTY) and Hostess Brands Inc (NASDAQ:TWNK), while it kept its positions in other companies including Alphabet Inc. (NASDAQ:GOOG) and HCA Holdings Inc (NYSE:HCA) intact. During the quarter, Scion Asset Management exited its position in Amgen Inc (NASDAQ:AMGN). In this article, we will discuss these moves made by the Scion Asset Management.

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Coty Inc. (NYSE:COTY) stock dipped 22% this year so far. However, it offers a healthy dividend yield of 1.39%. The stock accounted for 36.5% of Scion Asset Management’s portfolio. For the quarter ended on September 30th, 2016, the investment fund initiated a position in the stock by buying 550,000 shares. The fund’s holding amounted to $12.925 million. Of the hedge funds in our database, 46 funds held $3 billion worth of Coty shares in their portfolio at the end of the September quarter. Coty announced the acquisition of ghd, a premium hair styling equipment brand. ghd will become part of the Coty Professional Beauty division. It will be managed as a standalone business by its current CEO Anthony Davey and management team.

Alphabet Inc. (NASDAQ:GOOG) stock declined 0.28% in this year so far. However, Scion Asset Management retained its holding of the stock intact during the third quarter. The fund held $11.659 million worth of Alphabet stock at the end of the quarter, betting a third of its portfolio on this single name. Scion Asset Management had 15,000 shares of the company in its portfolio at the end of the period. Among the funds we track, 200 funds held Alphabet’s stock in aggregate at the end of June. It is by far the most popular stock among hedge funds. The company has reportedly reached a tax settlement with Indonesian government. Alphabet is expected to pay back taxes and fines. The tech giant may also recalculated its earnings made in the country.

HCA Holdings Inc (NYSE:HCA) stock forms 21.37% of Scion Asset Management’s portfolio at the end of the September quarter. The fund held 100,000 shares of the company with the market value of $7.563 million. The number of funds with long HCA Holdings positions was 62 at the end of the last quarter. The total value of their holdings stood at $3.3 billion, in comparison to $3.5 billion held by 72 funds at the end of previous quarter. The company recently announced the authorization of an additional share buyback program. The latest authorization allows the company to utilize up to $2 billion to repurchase its common stock. The company now has $2.04 billion left under the buyback program as of Nov 14, 2016.

Hostess Brands Inc (NASDAQ:TWNK) stock gained 7.26% this year so far. Scion Asset Management initiated its holding by buying 300,000 shares during the quarter. The market value of the position stands at $3.24 million and corresponds to 9.16% of Scion Asset Management’s 13F portfolio.  Hostess Brands reported 24% increase in its revenue for the third quarter of the year to $196.2 million. Its gross margin also increased 640 basis points to 44.1%. The company reported its adjusted EBITDA at $55.6 million, up 36.7% year over year. Its GAAP net income for the quarter stood at $33.5 million.

Amgen Inc (NASDAQ:AMGN) stock climbed 10.66% this year as it also saw Scion Asset Management liquidating its holding of the stock during the September quarter. The investment firm held 40,000 shares of Amgen. The move was very timely as Amgen lost more than 12% this quarter. Amgen reported positive top-line data from the second pivotal phase III study (STRIVE) on their calcitonin gene-related peptide (CGRP) receptor, AMG 334 (erenumab). The treatment is designed for the prevention of episodic migraine. The company is collaborating with Novartis AG NVS for the development of this drug.

DISCLOSURE – NONE