The GEO Group, Inc. (NYSE:GEO), Qurate Retail, Inc. (NASDAQ:QRTEA), and CoreCivic, Inc. (NYSE:CXW) are three key stock choices of Michael Burry, a legendary value investor who foresaw the 2008 housing collapse and staked everything on it occurring. Now he’s risking everything on six equities, which make up his hedge fund’s 13F portfolio.
Burry launched Scion Asset Management in 2013 after liquidating Scion Capital after the subprime mortgage crisis. Scion Capital was one of the best-performing funds of the 2000s, returning 489% net of fees in 7 1/2 years.
This performance, together with his celebrity from Michael Lewis’ book and movie ‘The Big Short,’ has made Burry one of the most known and sought after investors in the world to piggyback. Burry sold almost all of Scion Asset’s 13F portfolio in Q2, keeping just The GEO Group, Inc. (NYSE:GEO).
At the time, Burry cautioned investors that the market was suffering the “biggest speculative bubble of all time” and that the “mother of all collapses” was coming for meme stock and cryptocurrency investors. Bitcoin lost 63% of its value in 2022, a pattern Burry likens to losses in 2000 and 2008.
Bristol-Myers Squibb Company (NYSE:BMY), Warner Bros. Discovery, Inc. (NASDAQ:WBD), and Booking Holdings Inc. (NASDAQ:BKNG) were among Burry’s Q2 sells.
Bristol-Myers Squibb Company (NYSE:BMY) was the only holdout from Q4 2021 throughout the first quarter of this year, but even it couldn’t escape the Q2 purge, as Burry sold all 300,000 of Scion Asset Management’s BMY shares. Burry’s bet paid off, as BMY shares surged 24% in the first half of the year.
Burry liquidated all 750,000 Warner Bros. Discovery shares his fund had bought a quarter earlier. WBD shares dropped 55% this year. Greenlight Capital divested its WBD holding in Q3, citing the company’s large debt burden and challenging transition as it integrates HBO Max and Discovery+ into a single streaming platform. In each of the previous two quarters, the number of hedge funds long WBD has climbed marginally.
Burry also sold his 8,000-share interest in online travel platform Booking Holdings Inc. (NASDAQ:BKNG) during Q2. BKNG shares fluctuated widely in Q1, so Burry may have earned a profit, lost money, or anything in between. Booking Holdings is considerably off its all-time highs in smart money ownership but remains a favourite investment among hedge funds.
Michael Burry has grown more positive on the market or a number of beaten-down firms in it, adding five new positions to his fund’s portfolio in Q3. If there’s any question that Burry’s stock recommendations can impact the markets, their performance on November 14 should erase it. Four of his six equities gained at least 2% throughout the day, and several gained 5% after hours. Only Charter Communications, Inc., a large-cap company, fell (NASDAQ:CHTR).
Scion Asset Management’s 13F portfolio is now worth $41.3 million, up from $3.31 million at the end of June. It was worth $201 million at the end of Q1. Scion’s portfolio grew to nearly $2 billion in 2021, but it was dominated by options holdings, including a short bet on Tesla Inc. (NASDAQ:TSLA).
Now let’s look at Michael Burry’s current portfolio to see what may have inspired him to buy these companies against a background he presumably still perceives as awful.
Our method
The following data is from Scion Asset Management’s latest SEC 13F filing for September 30, 2022. Insider Monkey’s research shows that hedge funds’ consensus stock choices may generate spectacular results.
All hedge fund data is based on 900+ funds monitored by Insider Monkey that filed 13Fs for the Q3 2022 reporting period.
Scion Asset Management’s 13F position in Liberty Latin America Ltd. is $958,000.
44 hedge fund owners
CoreCivic, Inc. (NYSE:CXW), The GEO Group, Inc. (NYSE:GEO), and Qurate Retail, Inc. (NASDAQ:QRTEA) are three of Michael Burry’s favourite companies. During the quarter, Scion added Liberty Latin America Ltd. to its 13F portfolio (NASDAQ:LILA). Scion purchased 155,761 LILA shares during the quarter, a 2.31 percent interest in the firm.
Hedge fund ownership in Liberty Latin America Ltd. (NASDAQ:LILA) surged in the first quarter of this year. Multiple funds seemed attracted by the stock’s value offer after it fell 31% in the previous two years. LILA shares have continued to trend down this year, reaching a 52-week low earlier this month. Several hedge funds have reduced their losses, with a 21% decline in long positions over the previous two quarters. Ken Griffin’s Citadel Investment also bought into Liberty Latin America in Q3.
Why have investors soured on Liberty Latin America Ltd.? (NASDAQ:LILA). The corporation owes $9.4 billion and lost $1.89 per share last year. And following 27% sales increase in 2018, revenue has been unchanged in 2022. Strong U.S. currency hurts the firm too. Yet it has some things going for it, such a healthy core free cash flow yield of roughly 18%, which might improve if the business shifts to higher margin divisions.
Steel City Capital is puzzled as to why Liberty Latin America Ltd. (NASDAQ:LILA) shares have underperformed the market this year, according to its Q3 2022 investor letter.
“Liberty Latin America Ltd. (NASDAQ:LILA) is a dog this year, down 45% through the third quarter. The firm is extremely predictable, so there have been no operational shocks, and its floating-rate debt has been switched, shielding it from this year’s dramatic spike in interest rates. I’m not sure why it’s underperformed so much. This year’s free cash flow guidance is $120 million (ex. SBC), with a line-of-sight of $300+ million (ex. SBC) by 2024, therefore shares have traded at 4-6x price to free cash flow. “The Partnership has bought at these levels.”
Scion Asset Management’s 13F position in Charter Communications, Inc. (NASDAQ:CHTR) is $3.03 million.
69 hedge fund owners
Michael Burry purchased 10,000 shares of Charter Communications, Inc. (NASDAQ:CHTR) in Q3, his second telecom investment. Charter shares are down 40% this year and 52% from their August 2021 top, like most of Burry’s beaten-down recommendations.
Charter Communications, Inc. (NASDAQ:CHTR) believes its own shares are undervalued while it loads up on debt to buy back shares. Since 2016, the business has repurchased over 46% of its shares, but its debt has risen to about $100 billion, making investors cautious as interest rates climb. The good news is that Charter has been more lucrative in recent years, boosting its EPS from $5.29 in 2018 to $25.34 last year and its EBIT to $12.1 billion.
Board member Eric Louis Zinterhofer bought 27,202 CHTR shares this month, his first insider acquisition in 13 years as a board member.
The number of hedge funds long Charter Communications, Inc. (NASDAQ:CHTR) fell for the fourth consecutive quarter in Q3. Ownership of the stock is 15% lower than its 2016 highs. Warren Buffett’s Berkshire Hathaway had 3.83 million CHTR shares at the end of Q3.
Oakmark Funds feels Charter Communications, Inc. (NASDAQ:CHTR) shares are being unduly punished by the market.
CHTR trades like a bank stock owing to worries about broadband subscriber growth and competition. With a high single-digit P/E on next year’s profit expectations, we feel the market’s assumptions are too harsh. Charter is the largest broadband provider in 60% of its territory, and we anticipate operational profit growth even in a harder macro environment.
26 hedge fund owners
Michael Burry’s hedge fund added 132,561 AJRD shares to Scion Asset’s 13F portfolio in Q3. The new investment made up 12.8% of the fund’s 13F portfolio on September 30. Burry’s stock has up 22.8% from Q3’s conclusion.
Aerojet Rocketdyne Holdings, Inc. (NYSE:AJRD) has seen modest sales and profits growth in recent years, expanding sales by 16% in the previous year compared to 2018 revenues. Gross profit and net income have fallen over the last 4 years. In the third quarter, Aerojet’s sales of $550 million missed projections, while its adjusted EPS of $0.45 beat consensus by a cent.
Amazon and United Launch Alliance anticipate 47 space missions during the next five years, prompting the Alliance to acquire 116 RL10C-X Aerojet rocket engines. All else being equal, this should improve Aerojet’s revenue by 20% each year and profits by somewhat more.
In recent quarters, hedge funds have also dumped Aerojet Rocketdyne Holdings, Inc. (NYSE:AJRD). The amount of funds long AJRD has dropped 26% over the previous year, albeit that’s likely due to Lockheed Martin Corporation’s (NYSE:LMT) unsuccessful purchase bid in early 2022. Lee Ainslie’s Maverick Capital and Steven Boyd’s Armistice Capital have sold Aerojet Rocketdyne shares.
Michael Burry is positive on Qurate Retail, Inc. (NASDAQ:QRTEA), CoreCivic, Inc. (NYSE:CXW), and The GEO Group, Inc. (NYSE:GEO) Click down to learn why.
Value of Scion Asset Management‘s 13F Position: $6.41 million
Michael Burry repurchases CoreCivic, Inc. (NYSE:CXW) six months after selling the stock. CXW was introduced to Scion Asset’s portfolio in the fourth quarter of 2020 and became the fund’s biggest non-options position in the first quarter of last year, although it represented just a minor portion of that portfolio’s worth. 15.5% of Scion’s 13F portfolio is in this position.
CoreCivic, Inc. (NYSE:CXW) is the first of two prison operators Burry is optimistic on, which account for more than 50% of his 13F portfolio. The company’s revenue is on track to shrink for the third consecutive year, and its gross profit and operating income may also fall. The company’s net income has risen this year.
In August, CoreCivic cut its FY22 adjusted EPS projection, citing a delay in the reversal of Title 42, which might increase the number of asylum seekers imprisoned by ICE, the company’s biggest government client.
CoreCivic, Inc. (NYSE:CXW) hedge fund ownership was erratic between 2015 and 2020, but has steadied since the fourth quarter of 2020. They’ve gained 84% since then, including 8.88% in 2022. Citadel Investment more than quadrupled its CoreCivic holdings in Q3.
Value of Scion Asset Management‘s 13F Position: $10.1 million
Number of Hedge Fund Shareholders: 24
Michael Burry acquired 5 million shares of Qurate Retail, Inc. (NASDAQ:QRTEA) to his fund’s 13F portfolio during Q3. As of September 30, the position accounted for approximately a fifth of that portfolio’s worth. This isn’t the first time Burry has used Qurate, but never so publicly. He acquired 1.1 million shares in the third quarter of 2020 but sold them the following two quarters.
Qurate Retail, Inc. (NASDAQ:QRTEA) is another Michael Burry stock choice that’s been battered in recent years. Shares have fallen 93% since March 2018. Qurate handles various trademarks, including QVC and HSN (QxH). In the past year, these shops have lost 16.8% of their consumers. Bank of America analyst Jason Haas thinks it will be challenging for the firms to win back those clients, prompting a downgrade to ‘Underperform’ from ‘Neutral’ and a price drop to $1.20 from $4.00 this month.
QRTEA hedge fund ownership rose in the early days of the epidemic, but has subsequently declined and reaching an all-time low during Q3. Many of the stock’s bulls bought additional shares in Q3, including Jim Simons’ Renaissance Technologies and John Overdeck and David Siegel’s Two Sigma Advisors.
In its Q2 2022 investor letter, Wallace Weitz’s Weitz Investment Partners III Opportunity Fund analysed Qurate Retail, Inc. (NASDAQ:QRTEA).
“As we describe in our latest “Value Matters,” we believe these are characteristics that allow companies to “make their own breaks,” regardless of the near-term challenges we may face. During the quarter, we sold our remaining shares of Qurate Retail‘s (NASDAQ:QRTEA) common equity but maintain a position in the company’s 8% preferred shares.”
Value of Scion Asset Management‘s 13F Position: $15.5 million
Number of Hedge Fund Shareholders: 19
The GEO Group, Inc. (NYSE:GEO) is the lone survivor from Michael Burry’s Q2 13F portfolio and his top selection moving into Q4 2022. Burry began Q2 with 501,360 shares and ended Q3 with 2.02 million.
Burry’s dreams of The GEO Group, Inc. (NYSE:GEO) and CoreCivic profiting from a red wave in the senate and stronger crime laws have been crushed. Without a catalyst, he’s left with a cheap stock (7x ahead P/E) with no momentum. GEO’s sales will increase but stay below 2019 levels, and net profitability is less than half what it was three years ago.
The GEO Group, Inc. (NYSE:GEO) is another Michael Burry stock that’s been hammered, but has steadied. If it can rally soon is unknown. Cliff Asness’s AQR Capital Management and Paul Tudor Jones’ Tudor Investment Corp are among the bidders.
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