Scion Asset Management, the firm of “The Big Short” investor Michael Burry, disclosed this week that during the fourth quarter of 2019, it closed its holding in Bed Bath & Beyond Inc. (BBBY, Financial) and started five new positions: Maxar Technologies Inc. (MAXR, Financial), Qorvo Inc. (QRVO, Financial), Covetrus Inc. (CVET, Financial), Cenovus Energy Inc. (CVE, Financial) and BlackBerry Ltd. (BB, Financial).
Burry made his short investment in collateralized mortgage obligations during the 2008 subprime mortgage crisis. The investor started Scion in 2013 and has been reporting his holdings in public companies.
As of quarter-end, Scion’s $82 million equity portfolio contains nine stocks, with turnover of 48%. The top three sectors in terms of weight are consumer cyclical, technology and communication services, with weights of 40.70%, 29.99% and 13%.
Sold out: Bed Bath & Beyond
Scion sold 750,000 shares of Bed Bath & Beyond, trimming the portfolio 13.39%. Shares averaged $14.12 during the quarter. According to GuruFocus estimates, Scion gained approximately 46.02% on the stock.
The Union, New Jersey-based company warned on Feb. 11 that preliminary results for the first two months of fiscal fourth-quarter 2019, December 2019 and January 2020, show a 5.4% decline in comparable sales, driven by “short-term pain in [the company’s] efforts to stabilize the business” according to CEO Mark Tritton. Store traffic declines, inventory management issues and increased promotional activity contributed to the decline in comparable sales.
Warning signs of low profitability include a weak Piotroski F-score of 3, decelerating revenue growth and operating margins that have contracted over 20% per year on average over the past five years and are underperforming over 72% of global competitors.
Hotchkis & Wiley also sold shares of the home furnishings retailer during the quarter.
Maxar Technologies
Scion purchased 650,000 shares of Maxar, giving the position 12.38% weight in the equity portfolio. Shares averaged $10.49 during the quarter.
The Westminster, Colorado-based company provides space technology solutions like satellites, Earth imagery, geospatial data and analytics. According to GuruFocus, Maxar has a poor Piotroski F-score of 3 and debt ratios that underperform over 90% of global competitors, suggesting low financial strength.
Qorvo
Scion purchased 75,000 shares of Qorvo, giving the position 10.59% weight in the equity portfolio. Shares averaged $97.51 during the quarter.
The Greensboro, North Carolina-based company produces radio frequency filters, power amplifiers and front-end modules used in many of the world’s most advanced smartphones. GuruFocus ranks Qorvo’s financial strength 7 out of 10 on several positive investing signs, which include a strong Piotroski F-score of 8 and a solid Altman Z-score of 4.36.
Covetrus
Scion purchased 555,900 shares of Covetrus, giving the position 8.92% weight in the equity portfolio. Shares averaged $12.16 during the quarter.
The Portland, Maine-based company engages in animal health through a global, technology-driven platform dedicated to the companion, equine and large animal veterinary markets. According to GuruFocus, Covetrus’ cash-to-debt and debt-to-equity ratios underperform over 70% of global competitors, suggesting low financial strength. Despite this, equity-to-asset ratios are underperforming just 59.15% of global health care providers.
Cenovous
Scion purchased 600,000 shares of Cenovous, giving the holding 7.40% weight in the equity portfolio. Shares averaged $9.08 during the quarter.
The Calgary, Alberta-based company produces crude oil, natural gas and gas liquids in Canada and the U.S. GuruFocus ranks Cenovous’ profitability 6 out of 10: Although the company’s net margin and return on assets outperform 61% of global competitors, its operating margin underperforms 69.67% of global energy companies.
BlackBerry
Scion purchased 900,000 shares of BlackBerry, giving the position 7.02% weight in the equity portfolio. Shares averaged $5.51 during the quarter.
The Waterloo, Ontario-based company designs and markets wireless handsets, software and services. GuruFocus ranks BlackBerry’s financial strength 5 out of 10: Although the company’s equity-to-asset ratio of 0.65 outperforms 64.27% of global competitors, its debt-to-equity ratio of 0.3 underperforms 57.98% of global software companies.
PRIMECAP Management (Trades, Portfolio) and Canadian guru Prem Watsa (Trades, Portfolio) also own shares of BlackBerry.
Disclosure: No positions.
Read more here:
- Mario Gabelli’s Top 5 Buys of the 4th Quarter
- Leon Cooperman’s Top 6 Buys for the 4th Quarter
- Al Gore’s Generation Investment Management Buys 4 Stocks in the 4th Quarter
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