Michael Burry’s Top 7 Stock Buys in Q1 2023

Michael Burry’s Top 7 Stock Buys in Q1 2023

UPDATED Feb 27, 2024

A lot has happened in the first quarter of 2023! AI took the world by storm, Credit Suisse and several large US banks went under and China relaxed some of the strict zero-Covid measures that were curtailing economic growth throughout 2022.

Michael Burry’s Scion Asset Management were quick to act and have made some notable additions to its portfolio, capitalizing on some opportunities that arose due to the tricky macroeconomic climate. Burry, famed for his prediction of the 2008 housing market crash and subsequent big short, has shown renewed faith in two specific areas: the sustained growth of Chinese markets and the resilience of regional banks.

Data from China’s National Bureau of Statistics noted 4.5% growth in GDP. A figure that eclipsed forecasts which was likely helped by retail sales jumping 10.6% and industrial output rising 3.9%. These figures paint the picture that the growth story in China may be far from over.

On the other side of the Pacific, Burry has taken new positions in several regional banks, a move that comes on the heels of the recent collapses of First Republic Bank, Silicon Valley Bank, and Signature Bank. These were the second, third, and fourth largest bank failures in US history, respectively.

This bold move demonstrates Burry’s belief in the strong underlying value and potential recovery within the regional banking sector following a heavy sell-down from the market. His approach is a good reminder for investors to think long term and find high quality companies at fair prices.

Now let’s take a look at some of these latest additions to the Scion Asset Management portfolio.

7 companies

JD.com, Inc. provides supply chain-based technologies and services in the People’s Republic of China.

Why JD?

Leading Chinese e-commerce giant poised for growth amid technological innovation.

  • Michael Burry recently increased his stake in JD.com by 233.33%, purchasing an additional 175,000 shares. His current holdings in the company are now valued at approximately $10,973,000.
  • Scion Asset Management weren’t the only big players who showed interest in the Chinese company, with Christopher Davis at Davis Advisors and Chase Coleman at Tiger Global Management adding to their positions as well.
  • Burry’s buys in Q4 2022 and Q1 2023 stood in contrast to most other superinvestors who had sold down Chinese tech stocks quite heavily following concerns for corporate growth amid a COVID-19 resurgence.
  • JD.com is one of the leading e-commerce companies in China, providing a wide range of products to consumers through its website and mobile applications. The company also has a robust logistics network and offers a variety of services including advertising, financing, and cloud computing.
  • The company has been continuously investing in new technologies and has been expanding its services. It recently launched a new platform that provides supply chain and technology services to other industries.
  • Michael Burry’s increased investment in JD.com could be seen as a bet on the continued growth of the Chinese e-commerce and technology sectors. The sector had previously showcased some rapid expansion over the last few years but had hit a minor hurdle when it came to China’s response to a resurgence in COVID-19 late in 2022 as the strict zero-COVID measures had stifled economic growth. Following the end of these restrictions, the Chinese retail data picked up steam again.
  • While not necessarily the premise for Scion’s bet on JD.com, the company has recently announced that the CFO, Ms. Sandy Ran Xu, will take over the departing Mr. Lei Xu as CEO for the company.

Rewards

  • Trading at 46.4% below our estimate of its fair value

  • Earnings are forecast to grow 9.43% per year

  • Earnings grew by 990.7% over the past year

Risks

No risks detected for JD from our risks checks.

View all Risks and Rewards

Alibaba Group Holding Limited, through its subsidiaries, provides technology infrastructure and marketing reach to help merchants, brands, retailers, and other businesses to engage with their users and customers in the People's Republic of China and internationally.

Why BABA?

World-class tech conglomerate capitalizing on diverse sectors within the booming Chinese market.

  • Michael Burry has doubled his stake in Alibaba, purchasing an additional 100,000 shares. This increase in his holding results in a total current value of approximately $10,218,000.
  • In accordance to his reputation, Burry’s decision to add to his Alibaba holdings was quite contrarian in nature. Over the past few quarters, we’ve seen many institutional holders sell down their Alibaba positions, with some even liquidating their holding entirely as a response to concerns over China’s continued growth.The only other superinvestor who bought BABA was Daniel Loeb from Third Point.
  • Alibaba Group is a multinational conglomerate specializing in e-commerce, technology, and various other sectors. Originating in China, it has since expanded globally and is recognized as one of the world’s most valuable companies.
  • Alibaba’s business model is diverse, involving sectors such as e-commerce, cloud computing, digital media and entertainment, and innovative initiatives. Its e-commerce platforms, like Taobao and Tmall, continue to dominate in China.
  • The company is also investing heavily in the future. For instance, it has been making strategic investments in AI, cloud computing, and the Internet of Things (IoT) to strengthen its technology infrastructure.
  • Despite facing regulatory scrutiny in China and other challenges, Alibaba’s strong fundamentals and its position as a leading e-commerce and technology company in the world’s second-largest economy could be appealing to Burry. His decision to double his stake might be seen as a sign of confidence in the company’s long-term prospects and resilience, viewing the current uncertainties as temporary and the stock is undervalued following the recent sell-down of Chinese tech.

Rewards

  • Trading at 53% below our estimate of its fair value

  • Earnings are forecast to grow 12.52% per year

  • Earnings grew by 205.3% over the past year

Risks

No risks detected for BABA from our risks checks.

View all Risks and Rewards

New York Community Bancorp, Inc. operates as the bank holding company for Flagstar Bank, N.A.

Why NYCB?

Resilient regional bank with conservative lending practices.

  • Scion Asset Management recently took a new position in New York Community Bancorp, purchasing 850,000 shares. This marks their initial investment in the company, with the current value of his holdings standing at approximately $7,684,000.
  • Scion was joined by David Einhorn and the Kahn Brother Group in placing their faith in the regional bank this past quarter.
  • New York Community Bancorp, Inc. is a leading lender of multi-family loans in New York City and has the second largest multi-family portfolio in the country. NYCB focuses on apartment buildings that feature below-market rents. The Company has two bank subsidiaries: New York Community Bank and Flagstar Bank.
  • The bank has a strong reputation for its conservative loan underwriting practices and strong capital position, contributing to its solid performance over the years.
  • In terms of recent developments, the bank has been working on expanding its digital banking capabilities to better cater to the evolving needs of its customers. It has also been focused on improving its cost efficiency to deliver improvements to its bottom line.
  • Amid the recent collapse of several regional banks, valuations across the sector have plummeted. Burry’s decision to invest in New York Community Bancorp could be viewed as a strategic move to capitalize on this situation. His investment suggests he sees value in the stock at its current price, perhaps due to the bank’s strong fundamentals, strategic initiatives, and its resilience in the face of market volatility.

Rewards

  • Trading at 55.6% below our estimate of its fair value

  • Revenue is forecast to grow 10.98% per year

  • Earnings grew by 284.4% over the past year

Risks

  • Earnings are forecast to decline by an average of 63.7% per year for the next 3 years

  • Shareholders have been diluted in the past year

  • Large one-off items impacting financial results

  • Volatile share price over the past 3 months

View all Risks and Rewards

Capital One Financial Corporation operates as the financial services holding company for the Capital One, National Association, which engages in the provision of various financial products and services in the United States, Canada, and the United Kingdom.

Why COF?

Major U.S. bank with robust financial health.

  • Capital One Financial was another one of Burry’s new bets, purchasing 75,000 shares which values his current holdings at approximately $7,212,000.
  • Capital One Financial has caught the eyes of a few more institutional investors with the likes of Warren Buffett, Thomas Gayner of Markel Asset Management and Clifford Sosin from CAS Investment Partners also acquiring some shares throughout the quarter.
  • Capital One Financial Corporation is a bank holding company specializing in credit cards, auto loans, banking, and savings accounts. Headquartered in McLean, Virginia, it is among the largest banks in the United States by assets.
  • In its recent earnings report, Capital One showed strong financial performance with robust growth in earnings driven by higher net interest income - a result of the ongoing rate hikes - and lower provisions for credit losses.
  • The company also recently announced plans to resume buying back shares, reflecting its strong balance sheet position and confidence in its future performance.
  • Burry’s decision to invest in Capital One Financial may reflect his belief in the bank’s healthy balance sheet. The company’s decision to resume stock is a positive signal that they have ample capital - the lack of which caused the issues for the likes of First Republic bank and SVB. Burry has timed his buy-in with the recent drop in valuations across the banking sector, suggesting that he believes the stock is undervalued and a good opportunity for investment.

Rewards

  • Trading at 27% below our estimate of its fair value

  • Earnings are forecast to grow 8.82% per year

Risks

No risks detected for COF from our risks checks.

View all Risks and Rewards

Western Alliance Bancorporation operates as the bank holding company for Western Alliance Bank that provides various banking products and related services primarily in Arizona, California, and Nevada.

Why WAL?

High-performing regional bank with strong growth prospects and strategic acquisitions.

  • The first quarter saw Burry open a new position in Western Alliance Bancorp, purchasing 125,000 shares. This investment accounts for roughly 4.2% of Scion’s portfolio, with the WAL holding valued at approximately $4,443,000.
  • Bill Miller from Miller Value Partners joined Burry in his conviction towards Western Alliance, acquiring 58,400 shares in Q1.
  • Western Alliance Bancorp is a bank holding company based in Phoenix, Arizona, providing a wide range of banking and related services to businesses, professional firms, real estate developers and individual clients.
  • The bank has been consistently recognized for its strong financial performance and growth. It offers a wide range of services including commercial banking, treasury management, asset-based lending, and more.
  • The company also recently completed the acquisition of AmeriHome, one of the largest correspondent mortgage producers in the country for US$1 Billion in cash. This acquisition is expected to significantly enhance Western Alliance’s mortgage operations.
  • Much like the other regional banks on this list, Burry seems to have shown an interest recently in acquiring regional banks with healthy balance sheets. With the whole sector undergoing a re-rate as investors looked to exit due to the fear of a potential domino effect impacting other companies, the timing was perfect for Burry to pounce as he found a few well capitalized regional banks at very fair prices.

Rewards

  • Trading at 64.9% below our estimate of its fair value

  • Earnings are forecast to grow 16.74% per year

Risks

  • Profit margins (27.8%) are lower than last year (42.2%)

View all Risks and Rewards

Banc of California, Inc. operates as the bank holding company for Banc of California that provides various banking products and services to small and medium-size businesses in California.

Why PACW?

Regional bank looking out for clients’ deposits.

  • Michael Burry has recently initiated a position in PacWest Bancorp, purchasing 250,000 shares. This is his first investment in the company, with his current holdings valued at approximately $2,433,000.
  • PacWest Bancorp is a bank holding company based in Los Angeles, California, with assets of more than US$44 Billion. It provides a wide range of banking products and services, including commercial banking, real estate finance, and venture banking.
  • PacWest Bancorp has shown resilience in the face of market volatility, maintaining a strong balance sheet, solid capital ratios, and a healthy loan portfolio.
  • Conscious of the risks associated with excessive uninsured deposits on the books, PacWest Bancorp has worked to ensure that 73% of total deposits are insured, up from 48% at the start of the year. The company has also worked to improve liquidity, with US$12.4 Billion in liquid assets, exceeding the amount of uninsured deposits by 153%.
  • Burry’s decision to invest in PacWest Bancorp may reflect his belief in the bank’s strong fundamentals and resilience in the face of market volatility. Given the recent drop in valuations across the banking sector, it’s no surprise that several financials companies have caught Burry’s eye.

Rewards

  • Trading at 55.6% below our estimate of its fair value

  • Earnings are forecast to grow 110.81% per year

Risks

No risks detected for PACW from our risks checks.

View all Risks and Rewards

Huntington Bancshares Incorporated operates as the bank holding company for The Huntington National Bank that provides commercial, consumer, and mortgage banking services in the United States.

Why HBAN?

Customer-centric regional bank exhibiting strong fundamentals and potential for growth post-merger.

  • The last regional bank to find its way into the Scion portfolio was Huntington Bancshares, with 184,900 shares being added to the tally. This is a new position in the portfolio and is currently valued at approximately $2,071,000.
  • Huntington Bancshares seems to have caught the attention of Burry and Burry alone, with no other superinvestor reporting transactions in the last few years.
  • Huntington Bancshares Incorporated is a regional bank holding company headquartered in Columbus, Ohio. It provides full-service commercial, small business, and consumer banking services, mortgage banking services, treasury management and foreign exchange services, equipment leasing, wealth and investment management services, trust services, brokerage services, and customized insurance brokerage and service programs.
  • Huntington Bancshares has been recognized for its customer-centric approach and commitment to serving its communities. It offers a wide range of services and has a significant presence in the Midwest.
  • The bank has also completed its merger with TCF Financial Corporation recently, adding five new experienced board members in the process. The company also showed its growth mindset in the acquisition of Capstone Partners, granting Huntington clients access to investment banking and advisory services across 14 US cities.

Rewards

  • Trading at 51.2% below our estimate of its fair value

  • Earnings are forecast to grow 7.64% per year

Risks

No risks detected for HBAN from our risks checks.

View all Risks and Rewards

New Money may hold positions in the companies mentioned. Simply Wall St has no position in any of the companies mentioned.

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