BKNG - Tracking 13Fs: Michael Burry's Scion Asset Management Q3 Update

2023-11-16 02:49:01 ET

Summary

• Michael Burry closed out his large short positions against the S&P 500 and Nasdaq in Q3.
• Burry's portfolio turnover was high, with only 8 out of 42 positions remaining at the end of September.
• Burry expanded his positions in Stellantis NV, Nexstar Media Group, and Star Bulk Carriers Corp.

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

Last quarter Burry made headlines when his fund's 13F filing showed large short positions against both the S&P 500 and also the tech heavy Nasdaq tracker ( QQQ ) managed by Invesco. These positions were entirely closed out in Q3 and considering the fact that neither of those indices fell more than 5% in the third quarter they were likely at little to no gain. Turnover in his portfolio was again exceptionally high. Only 8 of the 42 positions Scion Asset Management held in Q2 were still held come the end of September. Crescent Energy Company ( CRGY ) and The RealReal, Inc. ( REAL ) were both reduced while Euronav NV ( EURN ), Nexstar Media Group, Inc. ( NXST ), Safe Bulkers, Inc. ( SB ), Hudson Pacific Properties, Inc. ( HPP ), Star Bulk Carriers Corp. ( SBLK ), and Stellantis N.V. ( STLA ) were all expanded. The rest of the positions were entirely closed out. Estimated AUM fell to around $44 million which is certainly down from last quarter although by how much is hard to determine. With current SEC guidelines there's no requirement to disclose option contract prices, just the price of the underlying asset. Since the funds' short positions against SPY and QQQ were made through buying put contracts it was nearly impossible to determine the monetary size of those holdings. As for new positions there were just four opened most of which we'll discuss at more length below but several of them are stocks which Burry has now consistently bought and sold and then bought and sold on a quarterly basis.

Expanded Positions:

Stellantis N.V.: Burry first opened this position sometime in Q2 of this year, prior to any major reports of what would become a major strike by members of the UAW Union who represent much of the auto-makers workforce. Ultimately, STLA reached a deal with the UAW and share prices never fell more than 10-15% during the strikes. In fact since the end of Q2 the stock is up 16% and Burry seems to think it's going higher considering in Q3 he added 75,000 shares to the 325,000 he already had. He would have been able to purchase shares this quarter anywhere between $17 and $20. The world's 8th largest auto-maker by market cap now is the largest position held by Scion Asset Management, at current prices its market value is around $8.1 million.

Nexstar Media Group: Nexstar is a TV media and broadcasting group that owns brands such as News Nation, The CW Network, and several more. Burry opened this position last quarter as well although he bought only 15,000 shares compared to the 33,651 he purchased this quarter making it the second largest holding for his fund and growing the position by more than 200% overall. Shares this most recent quarter would have been bought between $133 and $186 versus between $150 and $178 in Q2 so he was likely able to average down his entry price a bit. After surging more than 20% in the first month of the year the stock has struggled since, now down close to 15% YTD.

Star Bulk Carriers: Burry opened this position last quarter as well and grew it by about 35% this quarter but considering how many positions were closed out, SBLK moved from 17th largest to 3rd largest in the funds portfolio. The shipping company is based out of Greece and transports a wide variety of bulk commodities across global markets. Shares would have been bought between around $3 to $3.50 versus between $3.25 and $3.80, so another opportunity to average down in a stock the investor seemingly has some strong conviction in.

Euronav NV: While Euronav's market is entirely crude oil this is ultimately still a bet on the shipping and transportation industry. It makes for the third stock in that sector that Burry grew his position in. EURN operates out of Belgium and operates and owns its own fleet of ships used to move crude oil across the globe. They have had a solid year so far staying pretty much right on pace with the overall market returning about 11-12% YTD. Burry first opened this position in Q2 when shares traded between $14 and $18 and they've continued to trade in the same range since. His fund now owns 250,000 shares of the oil transporter making it the 8th largest holding.

New Positions:

iShares Semiconductor ETF ( SOXX ): Similarly to the QQQ and SPY puts, this new short position Burry opened against the BlackRock ( BLK ) ETF with holdings like ( AMD ), ( NVDA ), ( AVGO ), and ( INTC ) is of an unknown size. The filing shows a new put position of 100,000 shares against SOXX. Even at that it's unclear if he holds 100,000 shares through contracts which would mean he holds 1,000 put contracts or if he in fact purchased 100,000 total put contracts. Nonetheless the new position is worth taking note of especially when we consider some of the activity in the sector. The NVDA CEO has been selling 10's of millions of dollars worth of shares over the last several months, Buffett closed out of Berkshire's massive Taiwan Semiconductor ( TSM ) position in Q1 of this year less than a year after it was opened, and tensions between U.S. and China has all but lessened in the last year or so. That said, there haven't been many signs that the industry will slow down. The index is now up close to 50% YTD and the majority of chip-makers reported strong Q3 earnings back in late October. SOXX traded as high as $535 and as low as $460 in Q3 when Burry was purchasing put contracts, today it trades around $510.

JD.Com, Inc. ( JD ) & Alibaba Group Holding ( BABA ): Burry's relationship with JD and BABA which is also a new position this quarter is volatile. I chose to combine these two into one section considering how correlated Burry's trading of the two stocks has been. At the beginning of Q2 these were Scion's largest two holdings only to be entirely closed out during the quarter. They had just previously been opened in the first quarter of this year as well. Now it seems his appetite for the Chinese tech stocks has reawakened as he bought 125,000 shares of JD and 50,000 BABA shares in Q3. JD has been getting crushed this year, down about 50% so far, giving Burry an opportunity to purchase shares in the $28-41 range. Today the stock trades at $28-29 per share. BABA has had a better year although not a fantastic one, down about 12% so far. This most recent quarter BABA shares traded between $84 and $102 versus today's price of around $87. The two stocks again moved to the top of the fund's holdings with JD and BABA now the 7th and 5th spots in terms of percent of AUM. JD released earnings on November 15th just a day after Burry's filing and shares jumped close to 10% in opening trading. In line with its peer, BABA also gapped up around 5% at open.

Booking Holdings Inc. ( BKNG ): This was the only other new position this quarter and it's unique. The fund purchased 1,500 shares of the major travel services firm and at the same time purchased put options shorting it. In the picture below you can see the holdings directly from the filing. Best guess is Burry is engaged in some sort of covered put strategy however that would imply that the 1,500 shares held by the fund are actually sold short. Current 13F filings are not required to disclose whether or not shares are sold short.

Reduced Positions:

Almost all positions that were reduced were ultimately closed out but two were shrank and still remain in the funds portfolio today. The RealReal and Crescent Energy Company. REAL operates an online marketplace for reselling luxury goods and has been held by Burry and his fund since the first quarter of this year. CRGY is an energy company operating in natural gas, crude oil, and NGLs.

Closed Positions:

This section won't focus on any one particular stock as we've usually done in the past as most of the portfolio was turned over. The most notable close out was of the short positions against SPY and QQQ made through a number of put contracts. As we mentioned in the intro these positions were likely closed out a little to no gain. Considering both indices have gained more than 5% since the end of Q3 his sales probably came at a good time.

Other notable close outs include Expedia Group ( EXPE ), Charter Communications ( CHTR ), which were the 3rd and 4th largest holdings for Burry's fund last quarter outside of the short positions. The CHTR shares were purchased in Q2 between $320 and $368 and were sold for as high as $455 and as low as $368 but presumably at a nice gain. The EXPE position was also opened in Q2 and was averaged in between $89 and $112. Burry could have sold shares for as high as $122 but following poor Q2 earnings in late July shares gapped down more than 10% and continued to slip to as low as $99 a share.

Following the hack at MGM Resorts International ( MGM ) this position was closed out as well and was previously the 8th largest holding. Longtime Burry stock, The GEO Group ( GEO ), finally exited the portfolio entirely. This was the largest holding for Scion for nearly all of last year. The CVS Health Corporation ( CVS ) position, which was held for just one quarter, was closed out at what could have been upwards of a nice 15% gain. He made another potentially solid trade on Generac Holdings ( GNRC ) which was a position also held just from Q2 to Q3 of this year. Shares could have been acquired for as low as $93 in April before they started to run all the way up to $149 by the end of June. However, that's about as high as they went, peaking around $153 on August 1st just to tank some 25% the next day on second quarter earnings results. Shares traded as low as $103 in late September so Burry certainly made money on this trade, it's just a question of how much. All in all by the end of Q3 a total of 20 positions from the previous quarter had been closed out.

Final Overview:

Quarter to quarter turnover is always high in Dr. Burry's portfolio but this quarter sets the bar even higher. That said as you might have taken away from the 'Closed Positions' section he made a number of exceptionally well timed individual stock picks minus the short positions against SPY and QQQ. He's done pretty much the same thing this quarter with a relatively diverse selection of stocks across 5 to 6 different sectors. The position that will likely receive the most attention from his portfolio this quarter is the short against the semiconductor industry. While this has financial implications there are also larger geo-political scenarios, primarily involving the U.S. and China, which might need to play out for such a hot sector to take a hit. Most of the top ten holdings in SOXX are up at least 50% YTD. The fund also has vigorously traded Chinese tech stocks JD and BABA so it seems Burry has honed his focus on playing foreign policy events concerning the two largest economies on the globe.

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