'Big Short’ Burry Stocks Turn RED ! Why ?
Intro.
I first covered Michael Burry on 01 Jan 2024. Click here ! to read the original post.
It’s been 7 months since and a review of his latest holdings is both timely and an insightful into what is trending in H2 2024.
Emulating these gurus’ habits, as individual investor we should review our holdings and determine (honestly) if they are still in line with market’s interest and direction.
Red Chips’ Return ?
As investors around the world attentively watch his stock bets, Michael Burry has indeed, shaken up his stock portfolio.
Based on latest 13F filing, he demonstrated his bullish sentiment and increased exposure to shares of Chinese companies.
His Chinese stake (now) makes up nearly 50% of his entire holdings. Wow, right !
Below is what have been filed: (see below)
$Alibaba(BABA)$. Purchased 30,000 stocks, making up 21.26% of his portfolio
$Shift4 Payments, Inc.(FOUR)$. Purchased 100,000 Shift4 Payments stocks, making up 13.97% of portfolio.
$Molina Healthcare(MOH)$. Purchased 24,530 stocks, constituting 13.89% of holdings.
$Baidu(BIDU)$. Bought 35,000 shares, making up 12.36% of portfolio.
$JD.com(JD)$. Sold 110,000 stocks, leaving 12.31% of portfolio.
What Else ?
Besides loading up on Red chips, Michael has also off loaded some Blue chips in the process.
They included:
Amazon (NASDAQ: AMZN).
Alphabet (NASDAQ: GOOGL).
Oracle (NYSE: ORCL).
Does this imply Mr Burry’s bearish sentiments on the US economy and in particular high-valuation tech stocks ?
Rise of BABA ?
Alibaba, the Chinese eCommerce giant, (now) takes center stage in his portfolio after his rebalancing.
As of 15 Aug 2024, Baba recorded :
A -1.36% drop in pre-market.
A decline of -0.025% across the week.
An increased +1.87% over the month. (see below)
As of Thu, 15 Aug 2024 around 2:40pm ET, BABA was trading at $79.47 per share.
This represented a +6.30% advance on the YTD chart for Alibaba, pending its Q2 2024 earnings report.
By the time US market closed on Fri, 16 Aug 2024, Baba was at $83.18, up +4.58%.
The surprise surge was attributed to its latest quarterly results.
Q2 2024 Earnings.
Alibaba missed top- and bottom-line expectations in its Q2 earnings.
It continues to face headwinds in its core e-Commerce business amid:
Rising rivals’ competition from JD.com & PDD’s Temu.
A cautious Chinese consumer market.
BABA’s earnings vs LSEG estimates vs YoY comparison :
BABA - Revenue (USD) for Q1 2025
Revenue: RMB 243.24 billion (USD 34.01 billion) vs RMB 249.05 billion expected. It is up +4.0% YoY.
BABA - EPS for Q1 2025
Earnings per share (EPS) was $2.29 vs $2.09 expected. (see above)
Net income: RMB 24.27 billion vs RMB 26.91 billion expected. It has slipped by -29% YoY due to (1) decrease in income from operations” and (2) “increase in impairment” from its investments.
Alibaba Cloud Q2 Performance.
Investors are keeping a close eye on Alibaba Cloud computing division, that is seen as a future growth driver for the company.
For its most recent quarterly earnings:
Revenue hit RMB 26.5 billion, up +6% YoY.
This is the fastest growth rate since June 2022.
Like its US peers, BABA has invested heavily in artificial intelligence.
It also sells AI products via its cloud unit and AI-related product revenue continued to grow at triple-digits YoY.
To enrich its top and bottom lines, BABA has been trying to:
Focus on higher-margin contracts.
Improve on Operating efficiency.
This comes after “Adjusted earnings before interest, taxes, and amortization” (EBITA), a measure of profitability rose +155% YoY, for the Cloud division, in the latest June quarter earnings.
Does this imply a growing trend for all things AI in the Chinese market and it is timely to capitalize on it before it’s too late?
My viewpoints: (mine only)
Like other investment gurus ie. Bill Ackman and Warren Buffett, these market veterans have reviewed and adjusted their holdings, quite drastically - if I may say so.
Comparatively speaking, Mr Burry’s portfolio revamped could be considered “radical” to untrained eyes?
Both Ackman and Buffett have looked to the West in their latest investment.
Burry instead look to the East.
On 23 Jul 2024, it was learnt that Mr Buffett has sold 1,395,500 BYD shares for a tidy sum of HKD 340 million (USD 43.6 million). (see above)
After sales, Berkshire Hathaway has less than 5% of BYD.
Is it true that the Chinese economy has turned the corner and is set to recover in the medium to long term ? I do not think so. (see below)
On a 17 Aug 2024, South China Morning Post article, unemployment is on the rise as graduates are poised to join the labour market.
Above news article reveal a lot about the Chinese economy and businesses’ health status (available jobs) versus the graduates pool.
Of late, there is hardly any news on China’s massive cross borders One Belt, One Road initiative, that requires massive financing that China neither has nor are willing to spend when domestic economy, is chugging along lifelessly.
With that in mind, what makes Michael Burry so confident that the Chinese stock market will rebound soon?
Could it be a case of him going in first and have the first catch of the day? When investors arrive in droves; that’s when he will jump ship. Unlikely right ?
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Do you think Michal Burry saw something in the Chinese economy & stock market that mere mortal like myself, have missed out ?
Do you think he will be accurate about Red chips stocks, just like he was with the subprime mortgage crisis, that resulted in the “Big Short” wealth and then movie story telling ?
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Burry’s shift to Chinese stocks is bold! If the Chinese market recovers, he could be ahead of the curve. 📈
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