JDCMF - Analyzing 13Fs: Michael Burry's Scion Asset Management Q2 Update

2023-08-16 05:11:35 ET

Summary

• Michael Burry closed out most of his Q1 positions in the second quarter, reducing positions in Signet Jewelers, Liberty Latin America, and New York Community Bancorp.
• Burry more than doubled his position in The RealReal Inc. and added shares of The GEO Group.
• Burry purchased a substantial number of put contracts on the S&P 500 ETF and the Invesco Nasdaq 100 ETF and added new positions in Expedia Group, MGM Resorts International, Generac Holdings, and CVS Health Corporation.

In today's article, we bring you the latest update in our recurring series based on analyzing 13F filings and the latest moves of some of the world's most renowned funds and asset managers. Our original article on the matter and the main thesis behind it can be accessed through this link.

Quarterly Overview

In last quarters article we focused primarily on Burry's new positions in the regional banking sector which presumably he opened sometime around the rapid decline and eventual failure of several banks in the sector. As one could expect from how he has handled his portfolio in the past he closed out of a majority of those positions this time with likely minimal to no gains. Standard and Poor's ETF composed of regional banks ( KRE ) has returned around 7% since the end of Q1 but is still down nearly 20% YTD. Overall Burry closed out 13 of 25 of last quarters positions. He reduced positions in Signet Jewelers ( SIG ), Liberty Latin America ( LILAK ), and New York Community Bancorp ( NYCB ) and expanded on The RealReal, Inc. ( REAL ) by more than 100% as well as The GEO Group ( GEO ) and The Cigna Group ( CI ).

Scion's stock holdings value stayed about the same at an estimated $103 million however he made some sizable options bets which are difficult to place a valuation on due to how current 13F filing requirements are set up. That being said we can assume AUM grew to some extent throughout Q2 as total AUM at the end of Q1 was also around $103 million. He opened a total of 23 new stock positions alongside the massive short positions he opened on ( SPY ) and ( QQQ ) through put options. 2,000,000 on the Nasdaq ETF and 2,000,000 on the S&P ETF which, like we mentioned just prior, are hard to assign a dollar figure to. Currently, the SEC allows funds to use the price of the underlying asset and not the price of the specific option contract when filing 13Fs.

This is certainly not the first time Burry has made a substantial bet against the U.S. Economy, his most famous being those made in 2008, and it likely won't be the last. That being said he does still appear to have faith in a select group of stocks, several of which we will go over below along with some of the funds other activity throughout the second quarter.

Expanded Positions:

The RealReal Inc.: Burry more than doubled his position in the online discount luxury goods store since the first quarter when it was first opened. Despite some volatility the stock is up about 128% YTD and 91% since the start of Q2 when he started sizing up the position. In total he bought 815,558 shares between prices of around $1 to $2.22. REAL now trades at $2.50 a share.

The GEO Group: Burry has now held GEO in his portfolio since the final quarter of 2020 when the stock was dropping from around $11 to $8 a share. He has sized the position both up and down a number of times since but never completely closed it out. For most of 2022 and up until Scion's 2023 Q1 13F it was the largest holding for his fund. This quarter he added shares for the first time since Q3 of last year. He bought 200,000 shares between $7 and $9 per share. This comes as the stock has fallen about 40% since mid-February. GEO's biggest losses came on February 14th when Scion Asset Management released its Q4 2022 13F revealing Burry had sold off about 50% of his GEO holdings. Interesting to see him now getting back into the stock after his sales seemingly drove the price down. Today GEO trades around $7.30 a share.

New Positions:

S&P 500 and Nasdaq Puts ((SPY)) ((QQQ)): In what is certainly one of his most notable moves in a while, Burry has purchased or opened a substantial number of put contracts on both the S&P 500 ETF SPY and the Invesco Nasdaq 100 ETF QQQ. According to the 13F filing, his fund Scion Asset Management now owns 2,000,000 put contracts on both market indices. Assuming he hasn't offloaded this position since the end of Q2 this represents a notable amount of the open interest for puts on both the SPY and QQQ. That being said the 13F filing does not require funds to include any specifics such as contract expiration dates or strike prices. Below is a snapshot of the filing so you can see the trades. It appears the fund maybe used the closing prices on June 30th of each respective index as opposed to the price of the specific put contract(s) to calculate the value (number to left of 2,000,000) in the highlighted instances.

Expedia Group Inc. ( EXPE ): The online travel company now represents the largest holding in Burry's portfolio outside the value of the options position. He bought 100,000 shares for somewhere between $89 and $112 a share. The company has had quite a strong year so far with shares up close to 30% YTD and its highest annual revenues since 2019. Shares of EXPE can currently be bought for about $112.

MGM Resorts International ( MGM ): MGM is a stock we have just recently discussed in our Burry articles. Back in Q4 of 2022 he opened a position amounting to 7% of his portfolio only to be completely offloaded during the first quarter of this year. Now he seems to be back in again adding 150,000 shares over the second quarter and making it the sixth largest stock holding in his portfolio currently. The fund would have made its purchases between around $39 and $46 a share. Today, shares of MGM trade around $45. With shares up 36% YTD and more than 50% since he first started buying, it seems he might have regretted initially closing out the position in Q1.

Generac Holdings Inc. ( GNRC ): The power generator and supply company made headlines earlier this month when it gapped down close to 20% on weak Q3 guidance. Nonetheless GNRC stock is up a respectable 15% YTD and had gained upwards of 60% prior to the weak guidance from leadership. While we won't know until the next quarterly update if Burry held through this volatility he did purchase 55,000 shares during Q2, a period when the stock gained 37% and traded between $93 and $149.

CVS Health Corporation ( CVS ): CVS is probably the most 'blue chip' stock that Scion Asset Management now holds. The fund purchased 100,000 shares in Q2 for prices between prices of $67 and $77 a share. This year the stock has lagged behind the market, losing 23% so far through August 14th despite earnings being strong through the first two quarters. The health services and retail operation has also been spending an enormous amount this year on corporate lobbying expenses which makes for an interesting potential catalyst. They're on pace to spend a company record $16+ million. Additionally, the CEO bought close to $1 million in stock on the open market back in early May; the first buy from a CVS executive since 2020. CVS now trades around $74 a share.

Other new positions include a number of Japanese market focused ETFs like ( EWJV ), ( EWJ ), ( FLJP ), and ( SCJ ). Safe Bulkers, Inc. ( SB ), Precision Drilling Corporation ( PDS ), Qurate Retail, Inc. ( QRTEA ), and others.

Reduced Positions

New York Community Bancorp: Like discussed previously many of Burry's funds holdings last quarter were regional banks. However, after analyzing this most recent 13F filing we can see that the fund closed out of all its regional bank positions except for NYCB, although it was still reduced some 76%. This move isn't entirely out of left field as the bank has demonstrated sturdy financials in its earnings reports this year and kept investors confident despite the volatility in mid-March. The stock is up 45% YTD and close to 100% since most regional banks bottomed out in that mid-March period. Scion still holds 200,000 shares of the New York headquartered bank which currently trade at around $12.50 a share.

Signet Jewelers Limited: This stock was just introduced to the portfolio in the first quarter of this year when Burry bought 125,000 shares and made it Scion's third largest holding. It still makes up one of the funds larger equity holdings despite being trimmed 32% during Q2. With the stock up 17% YTD and 35% since mid-June, it's likely Burry was trimming some profits from the position. Shares of the jewelry retailer operator currently trade around $77.

Closed Positions

Alibaba Group Holding Limited ( BABA ): What was just the second largest holding in his portfolio in the last quarterly update has now quickly been reversed. The stock has not had a stellar 2023, returning just 1.6% YTD but having fallen around 17% since mid-January when the stock traded at $118 a share versus around $93 today. Burry sold his entire position of 100,000 shares throughout Q2. Alibaba represents one of the largest tech companies both in China and on the globe with a market cap of $240 billion. We also noticed Burry closed out of his position in Chinese tech giant JD.com ( JD ) so we can assume he wants to limit exposure to Chinese markets to at least some extent.

Capital One Financial Corporation ( COF ): Burry just got into Capital One in Q1 when he was also loading up on regional banks. The financial services firm has gotten a big vote in confidence in recent months with Buffett's Berkshire Hathaway started acquiring a small stake. It's possible Burry rode that wave a took his profits. The stock is up about 17% YTD but it's risen as much as 30% from its YTD lows in early May. If Scion was first buying shares towards the end of Q1 in the $90-$95 range and holding until late Q2 it's likely the fund made a healthy profit on this trade. In total, Scion Asset Management offloaded 75,000 shares of Capital One. The stock trades at $109 a share today.

Western Alliance Bancorporation ( WAL ): Burry closed out most of his regional banking holdings in Q2 including his largest in WAL. He purchased 125,000 shares sometime in Q1 and has now dumped the entire position. Despite the more than 80% drop the stock suffered in mid-March, it's now down only about 13% YTD and up 50% since the start of Q2. If his Q1 buys came at the time of or after the stock was halted during the extreme drop he likely cut this position at somewhat of a gain. WAL is now trading at $51 a share and in Q1 he could have acquired shares realistically at anywhere between prices of $8 and $80.

PacWest Bancorp ( PACW ): PacWest also fell some 80% at the same time as WAL and other regional bank stocks. However, unlike WAL, PACW did not have nearly as strong a recovery. PACW is down 60% YTD and about 15% since the end of Q1. Just like WAL, NYCB, FRCB, and others Burry opened a sizable position in the bank of 250,000 shares sometime in Q1, acquiring shares for anywhere from $5 to $30. Today shares are trading around $8 but traded as high as $12 in Q2 allowing for at least a short opportunity for Burry to cut profits.

Other closed out positions include most notably First Republic Bank ( FRCB ) which really wasn't closed out so much as it was erased. Another financial company Wells Fargo ( WFC ), Zoom Video Communications ( ZM ) which was just added in Q1, material engineer and manufacturer Coherent Corp. ( COHR ), and Devon Energy ( DVN ) were all closed out as well.

Final Overview

While it is difficult to get an exact sense of the size of Michael Burry and Scion Asset Management's short positions on SPY and QQQ they are certainly worth taking note of. 4,000,000 short contracts combined across the two indices is a massive statement and confident one as well as markets have remained strong since the beginning of Q2 when Burry first would have started to accumulate the positions. Since the start of April the S&P is up 8% and the Nasdaq is up 15% meaning his puts could be down significantly depending of course on the strike price and expiry date. In the past Burry's filings have had significant effects on the asset prices they include like in the case of GEO. This time he's entered a much larger pond and it will be interesting to see how, if at all, markets react to this filing in the coming days and weeks.

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