In my view, Michael Burry is one of the most sophisticated, intelligent, and thoughtful investors on the planet. And a 13F filing last night revealed what he’s been buying since the start of the year.
At first sight, there are a few interesting purchases, including Alibaba and Zoom Video Communications. But the really eye-catching thing was some investments in US regional banks.
Burry buys banks
The uncertainty in the banking system has been one of the major stock market stories of 2023. And Michael Burry has been seizing the opportunity to be greedy when others are fearful.
To some extent this isn’t surprising. The CEO of Scion Asset Management is known for a contrarian outlook when it comes to investing, both in finding stocks to buy and companies to bet against.
Furthermore, Burry tweeted in March that he didn’t see real danger in the US banking sector. Given this, Scion’s bank investments are just the CEO putting the company’s money where his mouth is.
It’s probably fair to say at least one of the investments hasn’t been a success. The filing lists shares in First Republic, which was subsequently seized by the US authorities.
Importantly, though, even if that investment was a dead loss, it was less than 2% of Burry’s portfolio. As a result, it’s more than possible for strong performances elsewhere to offset the losses.
More importantly, he clearly sees opportunity in shares that have been falling during the crisis. So does this mean I should be buying them for my own portfolio?
Caveats
I take Michael Burry very seriously as an investor. But before following his lead and loading up on bank shares, there are a few things to consider.
Most obviously, Scion’s 13F filing from last night isn’t a description of what the company’s current investments are. It’s a statement of what it owned at the end of March, around six weeks ago.
It’s therefore possible his attitude towards any of the stocks listed on the filing might have changed. They might have been sold from Scion’s portfolio by now.
The second reason (no less important than the first) is it’s important for an investor like me to use my own ideas when it comes to investments. I need to understand for myself the risks and rewards.
The fact someone else sees value in a stock, or even a sector, isn’t a good enough reason for me to invest. And that’s true even when the investor in question is someone as intelligent as Burry.
Third, the Scion CEO doesn’t typically make investments for the long term. In general, his recent stock purchases have been ways of turning a quick profit on a buyout or a short-term event.
This matters because it makes Burry’s stock picking a different sport to the kind of long-term investing I focus on. It’s definitely still worth studying and there are insights to be had, but it’s not the same.
Should I buy bank stocks?
Bank stocks look attractive to me right now. While that’s probably for different reasons to Michael Burry, it’s always nice to know a thoughtful, sophisticated investor is on the same side as me.
