Michael Burry, who aced the financial crisis betting against subprime mortgages, picked a winning stock to lead his Scion Asset Management equity portfolio in the third quarter.
Burry’s top position, Western Digital Corp. (WDC, Financial), rose the most of all the constituents of the S&P 500 over the past three months, according to GuruFocus data. The stock rose 35.78%, edging out KLA Corp. (KLAC, Financial), which gained 35.24%, and Target Corp. (TGT, Financial), up 24.35%.
Western Digital makes hard disk drives for data storage and owns brands such as G-Technology and SanDisk. Its products are used in an array of industries and emerging technologies, such as autonomous driving, connected homes and augmented reality. The stock, which has a $58.83 billion market cap, closed down 1.41% Monday at $59.64 per share.
The stock struggled during the first half of the year as memory chip prices continued to fall, as they had since the middle of 2018. Memory chip stocks like Micron (MU, Financial) and Western Digital began to revive in August as memory prices started to stabilize. On July 31, the company told investors that the flash market had reached a bottom and that it was “seeing signs of improving conditions.” On Sept. 4, Mizuho Securities analysts forecast positive pricing trends for flash drives entering the September quarter and second half of 2019.
Burry, whose investing style is influenced by Warren Buffett (Trades, Portfolio) and Ben Graham, started a position in Western Digital in the fourth quarter of 2018, when the price averaged $46. He increased the position by 50% in the first quarter when the average price fell to $45. In the second quarter, he raised the position 66.67% to 250,000 shares when the price averaged $45, near the lower end of its 52-week range of $33.83 to $65.31.
At second quarter-end, Burry’s Western Digital holding totaled 12.71% of his reported equity portfolio, with a value around $11.88 million. He has made about 30% on the investment, GuruFocus estimates based on quarterly average prices.
The position’s size exceeds that of his holdings in Cleveland-Cliffs Inc. (CLF, Financial) at 12.54% of the portfolio and Tailored Brands Inc. (TLDR, Financial) at 11.41%.
The investor, whose prowess Christian Bale depicted in the movie “The Big Short,” listed only 10 stocks in the portfolio of his Cupertino, California-based firm Scion Asset Management at the end of the June quarter. He changes positions often, though, with 61% turnover from the previous quarter, and may have changed his position during the third quarter.
Western Digital reported $3.6 billion in revenue for its fourth fiscal quarter ended June 28, down from $5.11 billion in the same quarter a year earlier. Its net loss totaled $197 million, compared to net earnings of $756 million a year earlier. The company expects positive demand to help fuel financial improvements in fiscal year 2020.
See Michael Burry's portfolio here.
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