Dr. Michael Burry is one of the financial world’s most closely followed hedge fund managers. He shot to fame last year after being portrayed in the movie “The Big Short,” which profiled his bet against the housing market in 2008. However, even in the run-up to the housing crisis, Burry was building his reputation as a respected value investor. His hedge fund, Scion Capital, was one of the best performing funds in the industry in the run-up to 2007. It was Burry’s ingenuity and attention to detail that helped the fund shoot to fame.
Unfortunately, running Scion Capital turned out to be too much for Burry to handle and he closed the fund down only a few months after his record bet on the housing market paid off. Since then, Burry has kept his investment movements close to his chest. However, at the beginning of this year, Scion restarted filing 13F forms with the SEC detailing positions.
Scion Capital’s most recent holdings
The most recent filing was made in mid-November for the previous quarter and listed four main holdings. In a departure from Burry’s traditional style of hunting for value in the small and mid-cap market, all of Scion’s holdings per the 13F are relatively well-known, liquid mid-cap and above companies. At first glance, it would appear that Burry has changed his strategy from deep value to undervalued growth and quality, following in the footsteps of Warren Buffett (Trades, Portfolio) who made a similar change.
Scion’s largest holding at the end of the last quarter was Coty Inc. (COTY, Financial). The firm owned 550,000 shares with a value of approximately $12.93 million. The second-largest holding is Alphabet Inc. (GOOG, Financial). The fund owns 15,000 shares amounting to $11.7 million for 33% of the overall stock portfolio. HCA Holdings Inc. (HCA, Financial) is the third-largest holding worth $7.6 million. Gores Holdings Inc. (GRSHW, Financial) is the fourth and final position. The firm owns 300,000 shares in Gores worth a total of $3.2 million or 9% of the overall portfolio.
While Burry’s deep value slant has been replaced with a new focus on quality and value, his desire to concentrate high-conviction positions in his portfolio is still alive and well. The Coty holding accounts for 36% of the equity portfolio listed (13Fs do not display cash holdings). Together, Coty and Alphabet account for around 69% of Scion’s investment portfolio with HCA making up around 22% and Gores 9%.
Different trading style
Over the next few articles, we will be looking at Burry’s current portfolio to see if any of the holdings are worth buying at current levels. But before I get into the figures, it is worth looking back at Scion’s buying and selling activity over the past 12 months to get some idea of Burry’s trading pattern. Indeed, the third quarter positions are almost entirely different from those reported beginning of the year. The first, second and third quarter 13Fs all revealed broad changes in Scion’s holdings, implying that Burry has recently adopted a more active trading style.
At the end of the second quarter, Scion held six positions. Theravance Biopharma Inc. (TBPH, Financial), Nexpoint Residential Trust Inc. (NXRT, Financial), NeoPhotonics Corp. (NPTN, Financial), HCA Holdings Inc., Amgen Inc. (AMGN, Financial) and Alphabet Inc. The value of the equity portfolio reported to the SEC was $45.6 million, approximately $10 million more than the third quarter figure.
At the end of the second quarter, the value of Scion’s equity portfolio came in at $51.3 million and featured: Theravance Biopharma Inc., Tailored Brands Inc. (TLRD, Financial), Nexpoint Residential Trust Inc., HCA Holdings Inc., Gentherm Inc. (THRM), First Solar Inc. (FSLR), Apple Inc. (AAPL, Financial) and Amgen Inc.
Lastly, at the end of the fourth quarter of 2015, Scion’s equity portfolio reported to the SEC was valued at $80 million (implying Burry is either holding a lot of cash or has seen significant investor withdrawals since the end of last year). The portfolio featured: ACE Ltd., Apple Inc., Bank of America Corp. (BAC), Bank New York Mellon Corp. (BK), Citigroup Inc. (C), CNX Coal Resources LP (CNXC), Community Health Systems Inc. (CYH), First Solar Inc., HCA Holdings Inc., International Business Machines (IBM), Men's Wearhouse Inc., Nexpoint Residential Trust Inc., PNC Financial Services Group Inc. (PNC) and Theravance Biopharma Inc.
Disclosure: The author does not own any share mentioned within this article.
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