After years of low-key investing at his Cupertino, California-based firm, Scion Asset Management, Michael Burry became more vocal in the media in the past few weeks. In addition to calling a bubble in passive investing and requesting changes at GameStop Corp. (GME, Financial), Burry disclosed some of his stock picks in South Korea, where stocks are “almost always cheap,” he said.
The investor, who shot to fame when his bet against the subprime housing market was dramatized in the film and book “The Big Short,” told Bloomberg on Aug. 28 he had invested in two South Korean companies: Ezwelfare Co. (XKRX:090850, Financial) and Autech Corp. (XKRX:067170, Financial). He was also “watching” one other that he might potentially invest in, CJ Corp. (XKRX:001040, Financial).
“Korea has so much potential,” Burry told Bloomberg in an email. “Yet Korean stocks are almost always cheap, and management teams are to blame because they do not treat shareholders equally as owners.”
Burry’s portfolio of U.S.-listed stocks lists 10 holdings, which were valued around $94 million at the end of the second quarter, with Western Digital (WDC, Financial) and Cleveland-Cliffs Inc. (CLF, Financial) his biggest holdings. His investment approach centers on fundamental, value-oriented analysis, but he also embraces investing based on macro trends.
“Scion plans to pursue Clients’ investment objectives primarily through fundamental research in pursuit of undervalued and/or misunderstood investment situations in the global theater,” his firm’s documents state.
Stocks in Burry’s Scion Asia fund are not all listed in his public equity portfolio because he is not required to list non-U.S. stocks, although he did reporting purchase shares of China’s Alibaba Group Holding Ltd. (BABA) in the second quarter.
South Korean holdings
Since revealing that he had “recently” increased his position in Ezwelfare Co., shares have risen 8.44%. The company has a market cap of 107.81 billion won ($87.5 million). Its shares traded at 9,890 won ($8.29) Monday, down 2.08%.
The Seoul-based small-cap company creates software for welfare and benefits. Over the past five years, its revenue has grown at a rate of 15.1% annually, while book value expanded at a rate of 1.6%. The company has a price-earnings ratio of 15.29, price-book ratio of 2.65 and price-sales ratio of 1.47.
Autech, an activist investment of Burry’s, has declined 3.33% since he disclosed an almost 10% stake. Shares traded around 11,600 won Monday, up 2.2% for the day and 7.91% year to date. Autech has a 178.54 billion won ($149.64 million) market cap.
Autech manufactures ambulance vehicles and specialty vehicles. It also owns several subsidiaries, such as an air conditioner company, a refrigeration company and a parking lot maintenance company.
Over the past five years, the company has grown its revenue at an annual rate of 9.4%, Ebitda at a rate of 26.4% and book value at a rate of 6.6%. Autech’s price-book ratio of 1 and price-sales ratio of 0.15 are both near their respective three-year lows. Its price-book ratio is 8.13.
Since Burry reported having his eye on CJ Corp. (XKRX:001040, Financial), its stock rose 2.02%. Its stock traded around 80,800 won ($67.72) Monday, up 0.25% for the day and down 30.34% for the year to date. The largest of the stocks he discussed, CJ Corp. has a market cap of 2.18 trillion won ($2.26 billion).
The company, a conglomerate, focuses on a variety of businesses, including food, pharmaceuticals, and entertainment and media. It has also expanded its holdings in the U.S. food market, acquiring frozen food maker Schwan’s Co. in February and Kahiki Foods last August.
Over the past five years, it grew revenue at a rate of 13.6%, Ebitda at a rate of 16% and book value at a rate of 8.2%. The company trades at a price-book ratio of 0.61, near a 10-year low. Its price-earnings ratio stands at 37.68, and its price-sales ratio is 0.08.
See Michael Burry’s portfolio here.
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