Michael Burry shorts Tesla and advises which stocks to buy. Do you have them too?
Published by: 22.06.2021 18:10:58Famous investor Michael Burry is known for his market foresight, which he bet against before the 2008 crisis, for example. Now he has his sights set on another investment that he expects to make a significant return. This time it is the American electric car manufacturer Tesla (TSLA), which now has a market capitalisation of over 600 billion (22.6.2021). Michale Burry and his firm Scion Asset Management purchased over 800,000 put options* worth over $534 million yesterday.
Unfortunately, nowhere did we read why Burry thinks the stock will lose value. Burry bet on the pre-2008 U.S. housing bubble and profited from the 2008 demise of the specialty "subprime" loan market and many large financial firms. His prescient predictions were detailed in Michael Lewis's book and subsequent film "The Big Short," in which Burry was played by Academy Award winner Christian Bale.
On the other hand, Tesla posted record profits in the first quarter of this year, avoided an industrial chip shortage, improved its manufacturing and even made a profit on bitcoin. Still, the stock has fallen on the sign of the lofty expectations the company now faces. But some analysts argue Tesla hasn't offered a concrete estimate of the number of vehicles it will produce in 2021!
*Put options give investors the right to sell shares at a pre-specified price and are a sign that an investor is predicting a decline in the value of a company's stock.
Which stocks does famous investor Michael Burry recommend?
1. SunCoke Energy, Inc. (NYSE: SXC)
SunCoke Energy, Inc (NYSE: SXC) is an Illinois-based commodities processing and handling company founded in 1960. Scion Asset Management, a private investment firm led by Burry, owns more than 1 million shares of SunCoke stock worth more than $7.7 million. The investment represents 0.56% of Scion's total portfolio. SunCoke shares have returned more than 130% to investors over the past 12 months.
On April 28, SunCoke Energy, Inc (NYSE:SXC) released its quarterly results, reporting revenue of more than $359 million and earnings per share of $0.20. Revenue for the first quarter of 2021 beat market estimates by more than $51 million.
2. NOW Inc. (NYSE: DNOW)
NOW Inc. (NYSE: DNOW) is a Texas-based industrial equipment company that focuses on the distribution of oilfield equipment worldwide. It was founded in 2013. The stock has returned more than 52% to investors over the past year. Michael Burry, through his asset management firm, owns 700,000 shares of the company worth more than $7 million. The investments make up 0.52% of the asset management firm's portfolio.
NOW Inc (NYSE:DNOW) reported quarterly earnings for the first three months of 2021 on May 5, reporting revenue of $361 million, down more than 40% compared to revenue in the same period last year, but beating market estimates by more than $22 million.
3. The Kraft Heinz Company (NASDAQ: KHC) CALL
The Kraft Heinz Company (NASDAQ: KHC) is an Illinois-based food and beverage company that was founded in 1969. More than 1.1 million shares of Kraft Heinz stock worth over $46 million are owned by Burry's Scion Asset Management, representing nearly 3.5% of their investment portfolio. Kraft stock has returned more than 43% to investors over the past year, despite pandemic-related setbacks that have hit the company's sales.
4. Facebook, Inc. (NASDAQ: FB) CALL
Burry's investment firm, Scion Asset Management, owns 550,000 shares in the social media giant worth more than $161 million, representing nearly 12% of Burry's investment portfolio. Facebook, Inc (NASDAQ:FB) has had a good year, offering investors returns in excess of 33% despite the pandemic, and despite the loss of ad sales, which will now fall away.
Facebook, Inc (NASDAQ:FB) now has over 45 analysts covering its stock among investment recommendations and has a consensus buy rating with a high target price and a low target price between $460 and $220.
Distillate Capital mentioned Facebook, Inc (NASDAQ:FB) in its Q1 2021 investor letter. Here's what Distillate Capital said about Facebook, Inc. in its letter:
"Facebook, Inc. has come in and out of the portfolio previously and did so this quarter based on a material improvement in projected free cash flow, so its valuation now meets the criteria for inclusion."
A California-based technology company founded in 1998. Scion Asset Management owns 80,000 shares of Alphabet stock worth over $165 million. Alphabet shares have appreciated in value to investors over the past twelve months with over 62% growth. The tech giant expects record revenue this year as ad revenue grows thanks to a reopening economy. The company has seen its stock rise sharply in recent weeks as business has resumed and companies have invested in their digital presence.
Want more tips? We'll be posting more tips on promising stocks shortly, following MB's guide.
Sources:
https://edition.cnn.com/2021/05/18/investing/tesla-michael-burry-big-short/index.html
https://fortune.com/2021/05/18/big-short-burry-bet-against-tesla-musk/
https://www.insidermonkey.com/blog/michael-burry-is-shorting-tesla-and-buying-these-10-stocks-instead-943935/
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