Michael Burry's Scion Asset Management appeared to be incredibly active in the fourth quarter of 2020, according to its latest 13F.
According to the report, which covers the three months to the end of December 2020, Burry acquired nine new positions during the period and added to two existing holdings. He also divested nine holdings throughout the period and reduced a further nine.
Interestingly, after all of this activity, Scion now has one of the most diversified portfolios since the hedge fund began reporting its holdings in the fourth quarter of 2018.
Scion's investing history
While Burry has managed money for outside investors in the past, he closed his hedge fund after the financial crisis. Firms only have to file 13F reports with the Securities and Exchange Commission when they reach over $100 million of assets under management.
On that basis, it seems reasonable to suggest that Scion, which now manages Burry's own fortune, dropped below this level after the financial crisis but recovered above the high watermark at the end of 2018.
Looking through the firm's recent filings, it is clear that the highly regarded value investor likes to pursue a concentrated portfolio approach. For example, at the end of December 2020, the firm had around 25% of assets invested in just four positions. The top five holdings make up 30% of assets under management.
This is not as concentrated as the portfolio has been in the past. For example, in the third quarter of 2019, Scion reported $60 million of assets in stocks and shares, with over 50% in just two positions.
I should note that these 13F reports only tell us about open equity positions. They do not include cash or credit holdings, so while the third-quarter filing may have indicated Burry had 50% of Scion's assets invested in just two holdings, the firm could have had just as much cash sitting on the sidelines.
Burry's portfolio holdings
The most significant portfolio addition last quarter was NOW Inc. (DNOW, Financial). Scion acquired 1.5 million shares in the business, giving it a 7.7% portfolio weight. This global distributor to the oil and gas and industrial markets has seen revenues fall by more than half over the past five years.
However, despite this decline, the firm's balance sheet is full of cash. At the end of the last fiscal period, its net cash balance was $376 million. It is currently changing hands at a price to tangible book value of 1.5, although Wall Street analysts do not expect the business to return to profit until at least 2023.
The second-largest addition to the portfolio was Wells Fargo (WFC, Financial), and the third-largest was GEO Group (GEO, Financial). Both of these additions now account for around 5% of the overall portfolio.
GEO is an interesting buy for Burry's portfolio. The firm is a real estate investment trust, which specializes in the ownership, leasing and management of correctional, detention and re-entry facilities across the U.S. (i.e. it's basically a for-profit prison company). Political factors have seen the stock come under significant selling pressure in recent weeks and months. After these falls, shares in the business at changing hands at just under book value.
This seems like a classic Burry trade. He likely sees significant value in this company's assets when looking beyond the political headwinds currently driving buyers away.
Three other stocks Burry was buying in the third quarter were Molson Coors Beverage Co. (TAP, Financial), CoreCivic Inc. (CXW, Financial) and HollyFrontier Corp. (HFC, Financial). It seems that to make space for these holdings and free up capital, Burry divested his GameStop (GME, Financial) holding, which previously made up around 11% of assets in Scion's equity portfolio.
Disclosure: The author owns no share mentioned.
Read more here:
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