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In an interesting turn, Michael Burry is invested in more than just water.
Burry is the hero of Michael Lewis’ book “The Big Short,” which debuted as a major motion picture late last year. Burry’s hedge fund, Scion Asset Management, just submitted its first 13F filing to the SEC, revealing which stocks the fund was invested in as of Dec. 31.
The last line of the Oscar-nominated movie, printed on a placard, read, “Michael Burry is focusing all of his trading on one commodity: Water.”
But that’s clearly not the case. Scion’s long U.S. equity portfolio includes big bets on big banks and health care.
Scion Asset Management Holdings as of Dec. 31, 2015
Source: Zero Hedge
Source: Burry considers himself a deep value investor at heart. He’s said before that he likes to go after “ick” stocks. These are stocks that inspire an ick reaction after a first glance.
Let’s just say that Burry hasn’t done that well year-to-date if he still owns the stocks listed in the 13F filing. All 14 of the stocks are down so far in 2016.
Burry’s Top Holding
Burry has a big bet on NexPoint Residential Trust (NASDAQ: NXRT), which was his largest holding heading into 2016. NexPoint makes up 11% of Burry’s portfolio. He owns over 3% of the company.
NexPoint is a real estate investment trust focused on multifamily real estate in the Southeast U.S. It’s highly concentrated geographically, with Dallas, Texas and Atlanta, Ga. comprising over half of its market exposure. The REIT pays a 7% dividend yield.
The other key is that NexPoint is a highly leveraged REIT. Plus, it has an external management structure, which means that management’s goals aren’t always aligned with shareholders.
Now, the silver lining is that activist investors have been swarming the externally managed space, looking to protect shareholders. The assets NexPoint has are solid, but with the balance sheet overhang, the best bet for shareholders is a buyout.
Big Tech Bets
Burry also has two big bets on tech giants. His second-largest holding is Apple (NASDAQ: AAPL). Close to 10% of his portfolio is invested in the iPhone maker. This comes as both Carl Icahn and David Einhorn’s Greenlight Capital were trimming their Apple stakes during the fourth quarter.
But Burry also has a big bet on International Business Machines (NASDAQ: IBM), with 8.6% of the fund invested in Big Blue. This is a Warren Buffett favorite as well, but the stock has fallen 16% in the last year and now trades at less than 10 times earnings.
Burry’s fund owns more than 1% of biotech company Theravance Biopharma (NASDAQ: TBPH). It’s Scion’s third-largest holding.
Theravance focuses on infectious diseases and diseases of the lung and gastrointestinal tract. It doesn’t generate any income, having lost over $200 million over the last 12 months, but it does have revenue – $40 million over the same period. But trading at 15 times sales, it certainly looks like a risky biotech bet.
Burry also has a big bet on solar through his fund’s investment in First Solar (NASDAQ: FSLR). As of the end of 2015, 8.3% of Scion’s portfolio was invested in the company. First Solar makes solar panels and also has a project management business that handles engineering and construction for power developers and power system owners. Although it’s trading at just 11 times earnings, it’s still not on the cheap side in the solar industry.
Michael Burry made his fortune by shorting the subprime mortgage market. Now he’s going long on some “ick” stocks. He clearly has a positive outlook on big banks and health care, but it’s his biggest and most specific bets that are most interesting, including the unique REIT, biotech and solar plays. It will be interesting to see how all this plays out for “The Big Short” hero in 2016.
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