Michael Burry's Stocks To Buy & Investing Strategy (JD, BABA, PYPL, CRM, MSCI, TSLA, NVDA, PLTR)
Summary
Sven analyzes Michael Burry's recent investment decisions, emphasizing Burry's characteristic contrarian and relative-value approach. He begins by discussing Burry's short position on Tesla (TSLA), noting its high P/E ratio of 372 against low projected earnings per share of 30 cents. Sven acknowledges Burry's logic given Tesla's past price surge, but highlights the complexity of shorting Tesla due to Elon Musk's marketing genius and the mandatory passive investment flows into the stock, calling it a "pure bet." He further states that Tesla's market capitalization above 1 trillion means that global passive index funds are compelled to buy 4% of Tesla for their holdings, potentially driving the stock higher even with poor results.
Next, Sven examines Burry's new position in PayPal (PYPL), which Burry entered around $49. Sven had previously discussed PayPal at $41, predicting a 40% gain due to buybacks, and notes the stock is already up about 20%. While acknowledging the trade's short-term success, Sven expresses personal reservations about PayPal's long-term growth prospects, preferring a "growing business" over a "declining business" for his own investments.
Sven then touches on Burry's purchases of Vevo and Autodesk (ADSK), which Burry bought after they had fallen significantly (around 50%). Sven interprets this as Burry buying on "negative sentiment" with the intention to sell on a "positive reversal." He admits to not knowing much about these specific companies.
Regarding Salesforce (CRM), where Burry also opened a position, Sven points out its 50% decline over the past year and a half and a P/E ratio of 23, down from over 40. Despite good underlying numbers, including projected 10% growth for the next fiscal year and 50% growth in a few years, Sven raises a critical concern about the unaddressed risk of a recession, which could significantly impact revenue. He emphasizes his value investing principle of buying when even a worst-case scenario makes the investment look good, implying he would only consider Salesforce at much lower price points, ideally "in the midst that of a recession" to limit downside.
Sven expresses a strong negative long-term view on MSCI (MSCI), a data company. While acknowledging its good numbers and recurring revenue, he unequivocally states he "would not touch this" due to the impending disruption of the financial industry by AI. He predicts that AI could render 90% of traditional financial services obsolete within 1-2 years, making companies like MSCI vulnerable to significant changes, and believes investors in such companies are "drinking the old-fashioned investment management Kool-Aid."
He also reviews Burry's puts on Nvidia (NVDA) and Palantir (PLTR). Sven explains that these puts, bought months ago (Nvidia) or in October for 2-year duration (Palantir), act as hedges, allowing Burry to take more long-side risks elsewhere while protecting against market downturns. Sven details the mechanics of puts, illustrating potential gains if a stock like Nvidia drops from $200 to $75, but does not offer his own sentiment on the underlying stocks.
Finally, Sven discusses Burry's significant positions in Chinese companies, including JD.com (JD) and Alibaba (BABA), which together represent about 14% of Burry's portfolio, along with Kuaishou. Sven acknowledges potential upside for Alibaba if it becomes an "AI winner in China." However, he cautions that these are "market reversal sentiment" plays for Burry, not long-term business investments in the traditional sense, and explicitly states he is "not really following Burry on his investments" due to his preference for fundamental, long-term value investing over active trading. He concludes by reiterating his preference for "Buffett investing" over Burry's "trying to be smart here, trying to be smart there" approach.
Mentioned Stocks
Reasoning: Sven explains that Michael Burry has puts on Nvidia, which are now "likely a little bit less worth" than their purchase price a few months ago. He discusses how puts can serve as a hedge in a portfolio, allowing an investor to be long on riskier assets while limiting potential downside. Sven provides examples of put option mechanics, illustrating that if Nvidia, currently at $200, were to drop to $75 in a month, an out-of-the-money put with a strike of $100 could yield 625 times the money. However, he does not offer a personal view or recommendation on Nvidia's stock itself.
Reasoning: Sven notes Michael Burry opened a position in Salesforce, which is down 50% over the last year and a half, with a P/E ratio of 23. He acknowledges good fundamentals, including projected 10% growth for the next fiscal year and 50% growth in a few years, along with good margins and cash flows. However, Sven raises concerns about the risk of a recession impacting revenue, a factor he believes is currently overlooked. He states that for true value investing, he would only consider Salesforce if it reaches a price where "even the worst-case scenario makes the buy look good," potentially during or in the midst of a recession at a level where his downside is limited and only upside remains.
Reasoning: Sven notes that Michael Burry also holds puts on Palantir, which are "worth a little bit more" than when he bought them, specifically 2-year puts. He reiterates that puts can function as a hedge, allowing an investor to "be long more riskier things" and get protection while playing shorting exuberance and buying pessimism. Sven offers no specific details or personal opinion on Palantir's stock, focusing solely on Burry's hedging strategy.
Reasoning: Sven notes that Michael Burry recently opened a position in PayPal around $49. Sven previously discussed PayPal at $41, predicting a 40% rise due to buybacks, and notes the stock is already up about 20%. He suggests that for a short-term trade, it's "still working" if one enters near Burry's price. However, Sven personally "didn't invest" because he seeks growing businesses for the long term, and he is "uncertain" about PayPal's long-term margin of safety, viewing it as a potentially "declining business."
Reasoning: Sven mentions Michael Burry's 6% position in Alibaba. He highlights potential significant upside if Alibaba becomes "the AI winner in China" due to the AI boom and CAPEX growth. However, similar to JD.com, Sven views investing in Chinese stocks in this context as purely betting on "market reversal sentiment" rather than long-term business fundamentals, and states he is "not really following Burry on his investments."
Reasoning: Sven discusses Michael Burry's short position on Tesla, noting its high P/E of 372 and low projected earnings per share of 30 cents, suggesting it's overvalued based on current fundamentals. However, he highlights that Tesla's market capitalization above 1 trillion means passive index funds are compelled to buy it, potentially driving the price higher even with poor results. He views shorting Tesla as "crazier than just being long" due to Elon Musk's marketing genius and the inelasticity of the stock. Sven concludes it's a "pure bet" and difficult to be "smart about it," understanding Burry's logic for shorting at $400 compared to its $113 price a few years prior, but does not offer a personal recommendation.
Reasoning: Sven briefly mentions that Michael Burry "already also bought Kuaishou," alongside other Chinese companies like JD.com and Alibaba, as part of his broader strategy for these markets. He provides no specific details or personal analysis on Kuaishou itself. Sven generally expresses caution about these Chinese stock positions, viewing them more as tactical "market reversal sentiment" plays rather than fundamental, long-term business investments.
Reasoning: Sven observes that Michael Burry is buying Vevo, noting that the stock is down almost 50%. He characterizes Burry's action as buying on "pure sentiment" due to negative price trajectory, with the likely intention to sell on a positive reversal. Sven admits he "doesn't know much about these companies."
Reasoning: Sven notes Michael Burry is buying Autodesk, similar to Vevo, indicating a strategy of buying on negative sentiment when the stock is significantly down (e.g., almost 50%). He believes Burry aims to sell on a positive reversal. Sven admits he "doesn't know much about these companies."
Reasoning: Sven acknowledges MSCI's good numbers, including 10% growth and a significant recurring revenue model with global clients. However, he states, "I would not touch this" for the long-term due to the financial environment being "ripe for disruption with AI." He predicts that in 1-2 years, AI could replace 90% of the financial industry's functions, including financial advisors, making traditional financial data companies like MSCI vulnerable. He also suggests that investors in such companies are "drinking the old-fashioned investment management Kool-Aid."
Reasoning: Sven notes that Michael Burry has a position in JD.com, which he opened before a recent price spike. He mentions the company still holds "a lot of cash." Sven suggests that if current trends continue and issues like pricing wars or government intervention are resolved, there "might be a repricing of this and reversal." However, Sven views such investments in Chinese stocks as purely "market reversal sentiment" plays rather than investments in businesses with dividends or ownership, and states he is "not really following Burry on his investments."