Here are seven Michael Burry investments to buy.
Scion Asset Management fund manager Michael Burry rose to Wall Street fame by predicting and profiting from the 2008 subprime mortgage crisis that ultimately triggered the Great Recession. Burry’s fame went mainstream in 2015 when the socially awkward, drum-playing stock picker was portrayed in the movie version of Michael Lewis’ best-selling book “The Big Short.” More than a decade after his legendary 2008 credit default swap short trade, Burry is now making headlines for his current short position in Tesla (ticker: TSLA). Here are seven Michael Burry investments to buy instead of Tesla, according to Scion’s most recent filings.
Lumen Technologies (LUMN)
Lumen Technologies changed its name from CenturyLink in 2020 and is the third-largest telephone company in the U.S. Lumen is a controversial investment. Bears highlight its struggling core broadband business and question the reliability of its 8.2% dividend yield after the company cut its payout by 50% in 2019. However, value investors such as Burry likely see a deep value play trading at just 8.7 times forward earnings and a sizable dividend payout in a market with few viable options for income investors. Scion holds 1.15 million shares of LUMN stock worth more than $13 million.
NOW is a supplier of energy and industrial products, equipment and other solutions. NOW’s revenue dropped from $2.95 billion in 2019 to just $1.62 billion in 2020 amid economic shutdowns and extreme headwinds in the energy market. NOW’s stock price plummeted 36.1% in 2020, but Burry appears to see the dip as a buying opportunity ahead of a potential economic rebound in 2021. That bet has paid off so far in 2021, and NOW shares are already up almost 50% year to date. Scion holds 1.5 million shares of DNOW stock worth about $15.7 million.
RPT Realty (RPT)
RPT Realty is an open-air shopping center real estate investment trust. Shopping centers were crushed by their e-commerce competitors in 2020 during the health crisis. However, opportunistic investors are betting on pent-up shopping demand in 2021 once the vaccination rollout is complete. RPT’s rent collections have already improved to 91% as of the fourth quarter. In its earnings call, management said the company’s balance sheet is strong and it is monitoring a strong pipeline of acquisitions. RPT stock pays a 2.6% dividend. Scion holds 1 million shares of RPT stock worth about $10.8 million.
Uniti is a unique real estate investment trust focused on communications infrastructure. After divesting Uniti Towers and Talk America, the company is now a pure play on fiber infrastructure. Windstream is Uniti’s biggest customer, accounting for more than half of its revenue and more than 80% of its earnings before interest, taxes, depreciation and amortization. Windstream provides both a steady cash flow and a large degree of stability for Uniti’s business. The stock also pays a 5.1% dividend. Scion holds 725,000 shares of UNIT stock worth about $8.6 million.
Western Digital (WDC)
Western Digital designs and produces storage solutions for data centers, mobile devices, personal computers and other applications. While many tech stocks have soared, Western Digital has stagnated over the past year. However, the company reported an earnings beat last quarter, and Morgan Stanley recently said a massive chip shortage in the semiconductor industry will be a bullish catalyst for memory prices. Burry may also like that Western Digital is an attractive value stock, trading at just 11 times forward earnings. Scion holds 150,000 shares of WDC stock worth about $10.5 million.
Allstate is a leading public U.S. personal lines property-casualty insurance company. The pandemic created an unprecedented environment for insurers in 2020. Allstate shares sold off aggressively in March 2020 on concerns that the company would see a spike in life insurance and business-continuity insurance payouts. Low interest rates have historically been bad news for insurance stock valuations. Allstate was somehow able to grow both revenue and earnings in 2020, yet its stock is still down 10% since the beginning of 2020. Scion holds 75,000 shares of ALL stock worth about $8 million.
Qurate Retail (QRTEA)
Qurate Retail is the owner of home shopping TV networks QVC and HSN. Prior to the health crisis, investors were understandably concerned with the ability of traditional TV home shopping networks to compete with online retailers such as Amazon (AMZN) and Shopify (SHOP). In fact, Qurate’s revenue was down 4.3% and it generated a net loss of $456 million in 2019. However, the company began generating significant profits starting in the second quarter of 2020, and net income was up 372% year over year in the quarter ending in December 2020. Scion holds 700,000 shares of QRTEA stock worth about $8.8 million.
Seven stocks Michael Burry likes better than Tesla:
— Lumen Technologies (LUMN)
— NOW (DNOW)
— RPT Realty (RPT)
— Uniti (UNIT)
— Western Digital (WDC)
— Allstate (ALL)
— Qurate Retail (QRTEA)
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