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MICHAEL BURRY


Michael Burry's Biography, Net worth, Personal life, Investing style and Interesting Facts

 

Michael Burry, the famed American investor and hedge fund manager, rose to prominence with his remarkable foresight and successful predictions during the tumultuous 2008 financial crisis. Here is a timeline of his life and career:

Biography

1971:

Born on June 19 in San Jose, California, United States, Michael Burry’s journey begins.

1990:

Graduates from the University of California, Los Angeles (UCLA) with a Bachelor’s degree. 

In fact, my time as an undergraduate at UCLA was a seemingly random walk through Economics, English, and Biochemistry, without even one course in accounting. – Michael Burry

1997:

Completes his medical degree from Vanderbilt University School of Medicine and obtains a physician’s license.

1997-2000:

Continues his medical education as a resident at Stanford University Hospital before leaving after his third residency year to start Scion Capital.

2000:

Takes the entrepreneurial leap by establishing Scion Capital, his own hedge fund, where he initially funds the venture with contributions from both himself and his family (His mother contributed $20,000 and his three brothers $10,000 each). 

2000:

Michael Burry’s first investors become Joel Greenblatt – founder of Gotham Capital ($1,000,000) and Jack Byrne from White Mountains ($600,000).

2004:

By the end of 2004, Michael Burry was managing $600 million. 

2005:

Recognizes early signs of trouble in the subprime mortgage market and strategically invests in credit default swaps (CDS) on subprime mortgage bonds, effectively betting against the housing market.

2007:

Burry’s accurate predictions came true when the subprime mortgage market collapsed, causing a global financial crisis. He not only saved his investors from losses, but he also made a significant profit for himself and his backers. He earned $100 million personally and $725 million for his investors.

2008:

Decides to close Scion Capital, returning the remaining funds to his investors, marking the end of an era.

2010:

The book “The Big Short” made Michael Burry famous. It told the story of how he bet against the subprime mortgage market and made a fortune when it collapsed. The book was a critical and commercial success, and it turned Burry into a household name.

2010:

Initiates a fresh chapter in his career by establishing Scion Asset Management, primarily managing his personal investments through this entity.

2013:

Publishes an open letter expressing concerns about the potential bubble in passive index funds, cautioning that they may distort the market and increase systemic risk.

2015:

The Big Short film directed by Adam McKay and written by McKay and Charles Randolph, based on Michael Lewis’s 2010 book The Big Short: Inside the Doomsday Machine is released telling the story of Michael Burry and other investors who bet against the subprime mortgage market in the lead-up to the 2007 financial crisis. 

2019:

Burry Gains attention for his significant long position in GameStop, a struggling video game retailer. This position takes center stage when the WallStreetBets subreddit community rallies behind the stock in 2021, leading to a massive short squeeze.

2021:

He Continues to captivate the financial world with his cautionary views on speculative excess and market risks. He actively shares his insights and analysis through his X (Formerly Twitter) account, amassing a substantial following.

2022-2023:

Burry Issues warnings about inflation and the potential for an impending recession, maintaining his reputation as a prominent financial seer.

Personal Life

Michael Burry was married twice. His first wife was a Korean descent and his second wife to whom he is still married is a Vietnamese- American. Michael Burry and his family live in Saratoga, California. His son was diagnosed with Asperger syndrome, and after learning more about the disorder Burry believes he also has it.

Net Worth

Michael Burry’s estimated net worth is around $300 million.

Burry became millionaire at the age of 29, when he sold part of his Scion Capital hedge fund to investors.

Michael Burry is NOT in Forbes World Billionaires list or in Bloomberg Billionaires Index.

Investing Style

Burry’s investment approach draws heavily from the principles outlined in Benjamin Graham and  David Dodd’s influential book “Security Analysis”, published in 1934.

Interesting  Facts

He was born with retinoblastoma, a rare form of cancer that caused him to lose his left eye at the age of two.

He believes he has Asperger’s syndrome, and has said that it allows him to see the world in a unique way.

Burry is a fan of heavy metal music including bands such as DevilDriver, Entombed, Motionless in White, As I Lay Dying, Dismember, Obituary, Lamb of God and Amon Amarth

In his Match.com profile, he described himself frankly as “a medical resident with only one eye, an awkward social manner, and $145,000 in student loans.”

The name Scion Capital was inspired by Terry Brooks’ novel “The Scions of Shannara”, one of Burry’s favorite books.

Michael Burry had successful finance website/blog (valuestocks.net) that won a Forbes “Best of the web” award for stock picking.

Michael Burry used to write articles on stocks for MSN Money in the early 2000s. 

Social Media

X (Formerly twitter) account: https://twitter.com/michaeljburry/

 

Michael Burry's Story: Founding Scion Capital

 

Key Takeaways 

In 1996 while being a medical intern he started a blog where he posted his stock-market trades and his arguments for making the trades.

 

He quickly gained a following, and his blog became known as one of the most insightful and prescient investment blogs on the Internet.

 

In 2000, he established his own hedge fund, Scion Capital and got his first investment ($1,000,000) from Joel Greenblatt (Gotham Capital) who was following his blog.

 

In 2005 he made a bet against the subprime mortgage market, which paid off handsomely (Burry made $100 million for himself and $ 725 million for his investors) when the market crashed in 2007-2008.

In 1996, Michael Burry was a medical intern on a cardiology rotation at Saint Thomas Hospital in Nashville, Tennessee. One night, he logged on to a hospital computer and went to a message board called techstocks.com. There he created a thread called “value investing.”

Burry was fascinated by the stock market, and he had been reading everything he could about it. He was convinced
that the market was overvalued, and he was looking for ways to profit from it.

On August 26, 1998 Burry started running his own website valuestocks.net. On his blog, Burry posted his stock-market trades and his arguments for making the trades. He also wrote about his investment philosophy, which was based on the value investing principles of Benjamin Graham and Warren Buffett.

VALUESTOCKS.NET www.valuestocks.net
Supposedly for value investors, though Warren Buffett might not agree with this definition of value. Run by a 28-year-old neurology resident Dr. Michael Burry, Valuestocks.net showcases Burry’s own $50,000 portfolio, which includes some surprising choices including Pixar, the maker of Toy Story. Has good information on how to identify net-net stocks (trading for less than assets minus all conceivable liabilities). Accompanying all this are Burry’s incisive reports, as good as anything from Wall Street. One of the site’s best features is a list of essential finance texts, including thumbnail reviews and links to Amazon.com (Burry’s only source of revenue, since he doesn’t accept banner ads).
BEST: Original analysis, links to great finance sites, and a must-read book list for value investors.
WORST: Limited content is sometimes dated. – Forbes May 22, 2000

Burry’s blog quickly gained a following, and he soon became known as one of the most insightful and prescient investors on the Internet.

In 2000, he established his own hedge fund, Scion Capital. The name Scion Capital was inspired by Terry Brooks’ novel “The Scions of Shannara”, one of Burry’s favorite books. Burry initially funded Scion Capital with his own savings and contributions from his family (His mother contributed $20,000 and his three brothers $10,000 each). However, he soon attracted the attention of other investors, including Joel Greenblatt and Jack Byrne. Greenblatt was a value investing guru, and Byrne was a member of Warren Buffett’s inner circle. Both Greenblatt and Byrne were impressed with Burry’s investment acumen, and they offered to invest in Scion Capital. Burry accepted their investments, and Scion Capital was officially launched. In its early years, Scion Capital was a small hedge fund with just a few million dollars in assets. However, Burry’s investment performance was outstanding. He consistently generated returns that beat the market, and he quickly gained a reputation as a top-performing hedge fund manager.

In 2001, the S&P 500 index fell by 11.88%, but Michael Burry’s hedge fund, Scion Capital, gained 55%. The following year, the S&P 500 index fell again, by 22.1%, but Scion Capital still gained 16%. In 2003, the stock market finally turned around and rose by 28.69%, but Burry beat the market again, with returns of 50%. By the end of 2004, Michael Burry was managing $600 million in assets.

In 2005, Burry began to focus on the subprime mortgage market. He believed that the market was unsustainable, and he started shorting mortgage-backed securities.

“By mid-2005, I had so much confidence in my analysis that I staked my reputation on it. That is, I purchased credit default swaps — a type of insurance — on billions of dollars worth of both subprime mortgage-backed securities and the bonds of many of the financial companies that would be devastated when the real estate bubble burst.” -MICHAEL BURRY

When the housing market crashed in 2008, Burry’s bet against the subprime mortgage market paid off handsomely. Michael Burry made over $100 million for himself and $725 million for his investors. From November 1, 2000 to June 30, 2008 the Scion Capital had impressive net 489.34 % gain (the gross gain had been 726% )

HOW MICHAEL BURRY PREDICTED THE 2008 MORTGAGE CRISIS

2003:

“I had begun to worry about the housing market back in 2003, when lenders first resurrected interest-only mortgages, loosening their credit standards to generate a greater volume of loans.”

– MICHAEL BURRY

2004:

“Throughout 2004, I had watched as these mortgages were offered to more and more subprime borrowers — those with the weakest credit. The lenders generally then sold these risky loans to Wall Street to be packaged into mortgage-backed securities, thus passing along most of the risk.”

– MICHAEL BURRY

2004:

“At the same time, I also watched how ratings agencies vouched for subprime mortgage-backed securities. To me, these agencies seemed not to be paying much attention.”

– MICHAEL BURRY

2005:

“By mid-2005, I had so much confidence in my analysis that I staked my reputation on it. That is, I purchased credit default swaps — a type of insurance — on billions of dollars worth of both subprime mortgage-backed securities and the bonds of many of the financial companies that would be devastated when the real estate bubble burst.”

– MICHAEL BURRY

2005-2006:

Back in 2005 and 2006, I argued as forcefully as I could, in letters to clients of my investment firm, Scion Capital, that the mortgage market would melt down in the second half of 2007, causing substantial damage to the economy. My prediction was based on my research into the residential mortgage market and mortgage-backed securities. After studying the regulatory filings related to those securities, I waited for the lenders to offer the most risky mortgages conceivable to the least qualified buyers. I knew that would mark the beginning of the end of the housing bubble; it would mean that prices had risen — with the expansion of easy mortgage lending — as high as they could go.

– MICHAEL BURRY

2007:

“During 2007, under constant pressure from my investors, I liquidated most of our credit default swaps at a substantial profit.”

– MICHAEL BURRY

2008:

“By early 2008, I feared the effects of government intervention and exited all our remaining credit default positions — by auctioning them to the many Wall Street banks that were themselves by then desperate to buy protection against default. This was well in advance of the government bailouts.” 

– MICHAEL BURRY

Burry_Books-ezgif.com-webp-to-png-converter

MICHAEL BURRY'S BOOK RECOMMENDATIONS

MICHAEL BURRY AND GAMESTOP INC.

Michael Burry invested heavily in GameStop in mid-2019

 

He saw an opportunity for the struggling video game retailer to conduct a substantial share buyback, effectively reducing the number of outstanding shares and potentially squeezing the short sellers.

 

Burry sold his entire stake in GameStop during late 2020, missing out on the astounding rally that followed, driven by an army of retail investors on the WallStreetBets subreddit.

 

GameStop’s stock price soared to unimaginable heights, reaching a peak of $483 per share in January 2021, representing a surge of nearly 2,000% from his exit point.

 

The Reddit-fueled surge in GameStop’s share price reached a point where Burry’s maximum holding, at its peak, could have been worth over $1.5 billion.

 

Despite missing out on the huge gains that followed, Burry’s early exit could have still netted him millions.

MICHAEL BURRY vs. ELON MUSK and TESLA

December 2020: Michael Burry shorts Tesla stock.

January 2021: Tesla’s stock price reaches an all-time high. Burry tweets: “Well, my last Big Short got bigger and bigger and BIGGER too. Enjoy it while it lasts.”

February 2021: Burry says that a 90% plunge in Tesla’s stock price wouldn’t send shockwaves through the stock market. He compares the hype around Tesla to the excitement during the dot-com and housing bubbles.

November 2021: Tesla’s stock price hits another record high. Burry tweets: “Can $TSLA fall 80, 90%?” He also points to Musk’s stock sales at the time as evidence that the Tesla CEO knows his company is overvalued. Musk responds by calling Burry a “broken clock.”

Q3 2021: Burry exits his short position on Tesla.

April 2022: Burry tweets: “The competition came for Netflix, just like the competition is coming for Tesla.”

September 2022: Burry tweets: “If I am tweeting this you can bet I am not short it. But I should be.”

October 2022: Tesla’s stock price is down 67% from its peak in November 2021.

Analyzing Alibaba Group Holding Limited (BABA). Why is Michael Burry investing in BABA?

Alibaba Group Holding Limited (NYSE: BABA), the Chinese multinational conglomerate specializing in e-commerce, retail, internet, and technology, has become a focal point for value investors around the globe. With its current market capitalization standing at $194.55 billion and a forward PE ratio that suggests market undervaluation, the company offers an attractive entry point for those seeking long-term value. This article provides an in-depth analysis of Alibaba’s financial health, market performance, valuation metrics, and prospects through a value investing lens.

Financial Health and Profitability

 

Alibaba’s total revenue over the trailing twelve months (ttm) has reached an impressive $130.82 billion, with a net income of $14.10 billion, indicating a strong profitability track. A gross margin of 37.26% is a testament to the company’s effective cost control measures and ability to scale operations profitably. The operating margin (12.10%) and net profit margin (10.78%) further confirm Alibaba’s competence in maintaining profitability despite the intense competition in the e-commerce sector.

Cash Flow and Liquidity

 

A key highlight for value investors is Alibaba’s free cash flow (FCF), which stands at $21.83 billion. This figure is paramount as it reflects the company’s operational efficiency and its ability to generate cash after accounting for capital expenditures. Alibaba’s significant net cash position of $62.38 billion, or $24.29 per share, offers financial flexibility to weather economic downturns, pursue strategic acquisitions, and fund growth initiatives without the immediate need for external financing.

Valuation Metrics

 

Alibaba’s trailing PE ratio of 14.09 and a forward PE of 8.05 suggest that the stock is trading at a discount to its future earnings potential. This is particularly compelling when compared to industry averages, which tend to be higher for technology and e-commerce giants. The Price to Earnings Growth (PEG) ratio of 0.60 indicates a potential undervaluation of the stock relative to its earnings growth, making it an attractive prospect for value investors.

Market Performance and Analyst Outlook

 

Despite the stock’s 20.08% decrease over the past 52 weeks, Alibaba’s beta of 0.47 indicates that the stock experiences less volatility than the overall market. This lower volatility is a desirable trait for value investors who typically seek stable investment opportunities. The analyst consensus rating of “Strong Buy” and a price target of $123.18 imply a substantial upside potential of 62.61%, painting a positive future outlook for the stock.

 

Debt Management and Efficiency Ratios

 

With a Debt / Equity ratio of 0.16, Alibaba showcases conservative leverage and a strong balance sheet. The interest coverage ratio of 17.1 demonstrates the company’s ease in managing interest expenses on its debt, which is crucial for financial stability and risk management.

 

Dividends and Returns

 

Alibaba’s dividend yield stands at 1.32%, reflecting a balance between returning capital to shareholders and reinvesting in the business. For value investors looking for a stable dividend combined with potential capital appreciation, Alibaba’s approach to capital returns could be appealing.

 

Risks and Considerations

 

Investors should consider Alibaba’s ownership structure, with a low institutional holding of 14.18%, which could lead to increased share price volatility. Additionally, regulatory risks in China pose potential challenges, requiring investors to be cognizant of geopolitical factors that could impact Alibaba’s operations.

 

Conclusion

 

In summary, Alibaba Group embodies many attributes sought after by value investors. Its impressive free cash flow, strong balance sheet, and robust profitability metrics are juxtaposed with a stock price that appears undervalued. While risks such as regulatory scrutiny and ownership concentration exist, the company’s financials and market position suggest that Alibaba is a value investment that could offer significant returns for those with a long-term investment horizon.

 

The value proposition for Alibaba is clear: a financially solid company with a favorable valuation, strong growth prospects, and prudent financial management. As value investors often emphasize the importance of a margin of safety, Alibaba’s current valuation provides just that, making it a potentially lucrative investment for those willing to undertake thorough due diligence and possess the patience to realize long-term gains.

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