Although he remained notably quiet for most of 2023, legendary ‘Big Short’ investor Michael Burry once again captured headlines with his bold investment maneuvers.
Notably, August revealed Burry’s bearish stance on the broader market as Scion Asset Management filed securities revealing significant put options on major stock indexes.
However, the anticipated market downturn failed to materialize, leading to substantial losses as Burry closed his positions. Undeterred, he shifted focus to semiconductors, shorting an exchange-traded fund (ETF) in the sector. Yet, this move proved equally challenging, as the ETF went on to hit all-time highs.
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As we step into 2024, the intriguing question arises: What market moves will Burry and his hedge fund undertake this year?
Burry’s bearish mindset
It is quite challenging to anticipate Burry’s moves, primarily because he never appears in public and he only sometimes voices his thoughts through tweets, which he often deletes.
However, it is clear that in contrast to the majority, Burry’s sentiment toward the market is notably more pessimistic.
Assuming his bearish position against chip stocks is still open, one could argue that Burry and Scion Asset Management are expecting the ongoing market rally to lose momentum soon and they are not alone in this thinking.
In the meantime, some of Scion’s individual portfolio holdings have been performing well. Notably, its investment in Stellantis (NYSE: STLA) – the hedge fund’s biggest position – is up around 30% from the average buy price.
Other stocks that have been profitable investments for Burry include Hudson Pacific Properties (NYSE: HPP), The RealReal (NASDAQ: REAL), and Signet Jewelers Limited (NYSE: SIG), among others. His investments in Chinese tech giants Alibaba (NYSE: BABA) and JD.com (NASDAQ: JD), on the other hand, haven’t reaped benefits.
Michael Burry is not the only bear
This week, stock analyst and former money manager Puru Saxena hinted that the current stock market uptrend may be “running out of steam.” The expert named several data points that underpin his stance, including overbought levels, extremely bullish sentiment, market overextension, and rising Treasury yields.
Comparatively, JPMorgan’s top strategist Marko Kolanovic said last year that bulls are overly confident that economic recession will be avoided in 2024. Recessionary risks, coupled with significant equity valuations, tight credit spreads, and “unusually low” volatility, are reasons why Kolanovic believes the market is poised for a pullback.
These macro risks are likely the same reasons why Burry unveiled two major bearish positions in 2023, however, the equity market has so far been incredibly resilient.
Adding to the market optimism, the Federal Reserve in December announced plans that it will begin cutting rates this year. Another key point that’s being continuously discussed is whether the Fed can successfully orchestrate the so-called “soft landing” – a controlled decrease in the pace of interest rate hikes aimed at curbing inflation, without causing a severe economic slowdown.
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