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James Li
James Li
Articles (1398)  | Author's Website |

Michael Burry's Top 5 Trades of the 3rd Quarter

'Big Short' investor closes Bed Bath & Beyond position, buys Facebook

Michael Burry, the investor famous for his "Big Short" investment in the 2008 subprime mortgage crisis, disclosed earlier this week Scion Asset Management's third-quarter portfolio. The top-five trades included the closure of its Bed Bath & Beyond Inc. (NASDAQ:BBBY) holding and new positions in Facebook Inc. (NASDAQ:FB), Western Digital Corp. (NASDAQ:WDC), CVS Health Corp. (NYSE:CVS) and Allstate Corp. (NYSE:ALL).

As depicted in the 2015 film, "The Big Short," Burry made a major short bet in collateralized mortgage obligations ahead of the 2008 financial crisis, generating a high payoff.

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While he closed his hedge fund in 2008 to focus on his personal investments, Burry has resumed reporting his holdings in public companies through his firm, Scion Asset Management. As of third quarter-end, the firm's $330 million equity portfolio contains 33 stocks, with 11 new positions and a turnover ratio of 28%. The top three sectors in terms of weight are communication services, consumer cyclical and health care, representing 34.38%, 19.22% and 15.45% of the equity portfolio.

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Sold out: Bed Bath & Beyond

Having purchased 1 million shares of Bed Bath & Beyond during the second quarter, Burry's firm sold the shares during the third quarter. Shares of the Union, New Jersey-based home furnishings retailer averaged $11.55 during the third quarter, up from the second-quarter average price of $6.82. GuruFocus estimates that Scion gained approximately 57.33% on the stock since initially buying shares during the third quarter of 2019.

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GuruFocus ranks the company's financial strength 5 out of 10: Although the company has a good Piotroski F-score of 6 and a high Altman Z-score of 3.63, debt ratios are underperforming over 83% of global competitors.

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On Friday, shares of Bed Bath & Beyond traded around $20.17, showing they are significantly overvalued based on its price-to-GF Value ratio of 1.58.

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Facebook

Scion purchased 50,000 shares of Facebook, giving the position 3.96% weight in the equity portfolio. Shares of the Menlo Park, California-based social media giant averaged $257.89 during the third quarter.

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GuruFocus ranks Facebook's financial strength 9 out of 10 on several positive investing signs, which include a double-digit Altman Z-score and an interest coverage ratio that outperforms 80% of global competitors.

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Facebook's profitability ranks 9 out of 10 on the back of profit margins outperforming approximately 90% of global competitors and returns outperforming over 85% of global interactive media companies.

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Scion placed Facebook as its second-largest common-stock holding with its purchase, second only to GameStop Corp.'s (NYSE:GME) weight of 5.26%. Other gurus that purchased shares in Facebook during the quarter include Li Lu (Trades, Portfolio)'s Himalaya Capital and Philippe Laffont (Trades, Portfolio)'s Coatue Management.

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Western Digital

Scion purchased 250,000 shares of Western Digital, giving the position 2.77% weight in its equity portfolio. Shares averaged $39.35 during the third quarter.

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GuruFocus ranks the San Jose, California-based data storage solutions provider's financial strength 5 out of 10: Although the company has a high Piotroski F-score of 7, Western Digital has a low Altman Z-score of 1.8 and debt ratios that are underperforming over 75% of global competitors.

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CVS

Scion purchased 150,000 shares of CVS, giving the position 2.65% weight in its equity portfolio. Shares averaged $62.33 during the third quarter; the stock is fairly valued based on its price-to-GF Value ratio of 0.93.

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GuruFocus ranks the Rhode Island-based health care company's financial strength 5 out of 10: Although the company has a high Piotroski F-score of 7, CVS's debt ratios are underperforming over 90% of global competitors.

Allstate

Scion purchased 90,000 shares of Allstate, giving the holding 2.57% weight in its equity portfolio. Shares averaged $93.31 during the third quarter; the stock is modestly undervalued based on its price-to-GF Value ratio of 0.88.

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GuruFocus ranks the Northbrook, Illinois-based insurance company's profitability 7 out of 10 on several positive investing signs, which include a high Piotroski F-score of 8, a 3.5-star business predictability rank and a three-year revenue growth rate that outperforms over 68% of global competitors.

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Disclosure: No positions.

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About the author:

James Li
I am an editorial researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

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