Investors have kept a close eye on the strategy of Michael Burry over the past several years for one good reason: Burry has demonstrated a keen understanding of financial markets, even seeing and understanding trends before the crowd.
In the early 2000s, this expert investor predicted the subprime market crash and bet against the U.S. housing market. This investment decision won him $100 million personally, and he delivered more than $700 million to those invested in his fund. Hollywood even brought Burry’s story to the silver screen a few years ago in the movie The Big Short.
This bold investor often goes against the crowd, as that example clearly shows, and sticks with his strategy — even if he experiences ups and downs along the way. He takes a long-term view and has the patience to wait as a particular story plays out — but he also has the judgment to reverse a decision and take a new stance.
In fact, this is what Burry did recently when he made a quiet but significant move in his portfolio — and it may signal something big ahead. Let’s take a look.
Image source: Getty Images.
Burry oversees $578 million in 13F securities at hedge fund Scion Asset Management, and like any manager of more than $100 million in U.S. securities, he must report moves on a quarterly basis to the Securities and Exchange Commission. This is by filing form 13F.
Before we dive into Burry’s second-quarter trades, it’s important to consider his stance in the first quarter. In a move slightly reminiscent of The Big Short, Burry once again bet against something that was booming in the U.S. economy. Back in the early 2000s, it was the housing market, and in more recent times, it’s been technology stocks.
In the first part of this year, Burry did this by buying put options in Nvidia(NASDAQ: NVDA), a company that’s become the bellwether for the artificial intelligence (AI) sector and even the technology market as a whole. Nvidia designs the world’s top AI chips, and offers related products and services too, to form a business that’s delivered double- and triple-digit revenue growth in recent years — and earnings have climbed to record levels. Burry also held puts in Chinese tech and AI company Baidu and tech giant Alibaba.
Put options allow the owner to sell an asset at a particular price by a certain date, even if the actual price is lower. These options are bearish, representing a bet against the asset or its industry.
So, these positions in Burry’s portfolio showed he was bearish on Nvidia and the technology industry in the first quarter of the year — a company and industry that have driven indexes higher over the past two years.
Now, let’s consider the striking move Burry made in the second quarter. He no longer held those puts on tech stocks — and he bought call options on Meta Platforms, Alibaba, ASML Holding, and Chinese e-commerce company JD.com.
Contrary to put options, calls are bullish. They allow the investor to buy the asset at a specific price by a given date — the idea is that the asset might be set to rise, and call owners can benefit by buying it below the market price.
Burry’s moves in the latest quarter suggest he’s switched from a bearish stance on tech players — and the overall market — to a bullish one. Considering this top investor’s proven expertise, his recent moves suggest something big: Technology stocks, which suffered earlier in the year amid concerns about President Donald Trump’s import tariff plan, may be out of the woods. These players could be heading for more gains, and might, like over the past two years, lead the overall market higher.
What does this mean for you as an investor? First, though Burry is a fantastic investor, it’s impossible to predict short-term market moves with complete accuracy. So just because Burry looks bullish on certain tech players now doesn’t mean they — or the market — will soar overnight.
But Burry’s move, along with other clues — such as companies’ forecasts for AI infrastructure spending and strong technology earnings in recent times — offer us reason to be optimistic about tech companies and the overall market. On top of this, even if we’re wrong about what may happen in the months to come, history shows us that the indexes and quality stocks always have gone on to win over the long run.
So, if you aim to hold on for the long term, it’s a great idea to, like Michael Burry, bet on some of the world’s top tech companies right now.
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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML, Baidu, Meta Platforms, and Nvidia. The Motley Fool recommends Alibaba Group and JD.com. The Motley Fool has a disclosure policy.
