Iconic investor Michael Burry faced a substantial setback earlier this month as he closed his significant bearish bet against the US stock market during the third quarter. With an initial notional value of $1.6 billion, his investment incurred estimated losses of 40% since its opening in August 2023.
However, despite the sizable loss, it seems Burry’s decision to exit this position was the right call. Recent market trends indicate that these losses would have expanded even more, as the US stock market continued its bullish run, reaching new monthly highs on Monday, November 20.
Michael Burry’s $1.6B ‘Big Short’ exit prevented further losses
Nasdaq 100, one of the two major stock market indices Burry bet against in his recently closed bearish position, surged to a 52-week high of 388 on November 20.
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The tech-heavy index moved forward amid a broader market rally led by technology stocks, with the likes of Microsoft (NASDAQ: MSFT), Nvidia (NASDAQ: NVDA), and Meta (NASDAQ: META), each hitting 52-week highs on the day.
At the same time, the S&P 500 – the second stock index Burry shorted – climbed to 4,547 on Monday, the highest since August.
US equities have been on a winning streak for the past couple of weeks, particularly after the most recent batch of economic data showed that the inflation drivers and the US economy’s growth are slowing down.
This increased the appeal of risk assets, including stocks, while reducing the gains seen in Treasury yields.
Burry’s bearish bet against semiconductor sector
The same regulatory filings that revealed that Burry exited his position against the S&P 500 and Nasdaq 100 also showed that the hedge fund manager directed his bearish sentiment toward a specific sector: semiconductors.
Notably, Burry purchased put options with a notional value of $47.4 million against the iShares Semiconductor ETF (SOXX), one of the biggest semiconductor exchange-traded funds (ETFs).
Similar to his previous move, this position is unlikely to reap significant rewards for the 52-year-old investor, considering that the majority of chip stocks tracked by the SOXX have also been on the rise amid the latest rally.
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