6 4 Associated CointreeAlex on 01/02/2022 - 14:07 cointree.com (142...Read More
In this article, we discuss top 10 stock picks of Michael Burry's 2022 portfolio. In order to skip our detailed analysis of Burry's hedge fund performance, stock selection and future market predictions, go directly to Michael Burry's 2022 Portfolio: Top 5 Stock Picks.
Michael Burry is the famous investor who predicted the housing market crash of 2007 a couple years before anybody could see it. Resisting revolts from his investors over the magnitude of his claims, Burry ultimately made $100 million in personal profits from betting against the subprime loan market, and made his clients well over $700 million. The story of this visionary bet was chronicled in Hollywood film 'The Big Short', where actor Christian Bale played Burry's character and aptly emulated the investor's eccentric mannerisms as well.
Burry holds an MD from the Vanderbilt University School of Medicine, but did not practice medicine to pursue his interest, and talent, in financial investing. He founded Scion Capital in 2000, and generated extraordinary returns for his clients. From 2000 to 2008, after which he liquidated his hedge fund in order to focus on his personal wealth, Scion Capital posted returns of 489.34%, while the the SP 500 returned just below 3% during the same period. The investor reopened his hedge fund, this time named Scion Asset Management, in 2013 and initially started investing exclusively in water, gold, and farm land.
Come 2022, and Burry once again has views on the market not everybody likes to hear. In May, the investor noted that the US market seems to be following the patterns of previous bubbles, leaving it positioned for a crash of monumental proportions. The tech-heavy Nasdaq Composite has lost 27% in the year to date, and mega-cap stocks such as Alphabet Inc. (NASDAQ:GOOG), Meta Platforms, Inc. (NASDAQ:FB), and Amazon.com, Inc. (NASDAQ:AMZN) have plummeted significantly in recent months. Burry thinks the SP 500's trajectory over the last 10 years is similar to its chart for the 10 years prior to the dot.com crash in 2000, as well as the Dow's chart for the decade leading up to the Great Crash of 1929. He blames human nature for this repetition of history, where stock market bubbles are formed and ultimately burst with painful consequences. In June 2021, he tweeted about the 'Greatest Speculative Bubble of All Time' predicting that excessive speculation and loans could cause a crash. He has also said in since-deleted tweets that the market is ''dancing on a knife's edge'.
Michael Burry's 2022 Portfolio: Top 10 Stock Picks
Michael Burry of Scion Asset Management
In the fourth quarter of 2021, Scion Asset Management held a total of 6 stocks. In the first quarter of 2022, the fund sold out of all its stocks except one, and added a number of tech names with a total portfolio of 12 stocks. Michael Burry also placed a $36 million bet against Apple Inc. (NASDAQ:AAPL), with a put position on 206,000 of the firm's shares.
Let's now take a look at the top 10 stocks to buy according to Michael Burry.
The Q1 2022 portfolio of Michael Burry's Scion Asset Management was used to pick its top 10 holdings. Hedge fund sentiment around each stock has been derived from Insider Monkey's database of 924 elite hedge funds tracked at the end of the fourth quarter of 2021.
Number of Hedge Fund Holders: 67 Scion Asset Management's Stake Value: $9.12 million Scion Asset Management's 13F Portfolio: 4.53%
Global Payments Inc. (NYSE:GPN) provides software solutions and payment technology for digital-based payments around the world. Scion Asset Management, according to its 13F filings for the first quarter of 2022, owns 67,000 shares of the firm at a value of $9.12 million.
Out of all the hedge funds tracked by Insider Monkey at the close of the fourth quarter of 2021, Global Payments Inc. (NYSE:GPN) was held by 67 hedge funds with a combined value of $3.31 billion. This is down from 68 hedge funds a quarter ago with $3.46 billion worth of positions in the company. Its largest shareholder in Q1 2022 was Orbis Investment Management, which held a $763 million stake in the firm consisting of 5.57 million shares.
On May 3, Global Payments Inc. (NYSE:GPN) was given a 'Buy' rating by Citi analyst Ashwin Shirvaikar, along with a price target of $180. The analyst noted that the stock fell 9% after the company downwardly revised its FY22 revenue outlook by $35 million, which he thinks was unjustified, and that the current share price presents a "remarkably attractive" buying opportunity.
For Q1 2022, Global Payments Inc. (NYSE:GPN) reported an EPS of $2.07, beating estimates by $0.03. Revenue of $1.95 billion increased 7.75% year-on-year, but fell slightly below estimates by $1.26 million.
Investment firm Oakmark Funds talked about Global Payments Inc. (NYSE:GPN) in its Q1 2022 investor letter. Here's what it said:
“Global Payments (NYSE:GPN) is a leading provider of merchant acquiring services. The company is also one of the largest providers of payment processing and related technology solutions to credit card issuers. We believe Global Payments’ merchant acquiring business is well positioned given its strength in software-driven payments. This is one of the fastest growing parts of the industry as small business customers are increasingly recognizing the efficiency benefits of having payments seamlessly integrated into the software they use to run their businesses. In addition, Global Payments benefits from the broader secular shift away from cash and toward electronic payment methods. Together, these tailwinds have the potential to drive low-double-digit revenue growth and even faster earnings growth. With this strong outlook and with management returning a significant portion of free cash flow to shareholders via repurchase, we think the stock looks attractive at its current valuation of just 12.5x next year’s expected EPS.
Along with Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN) and Meta Platforms, Inc. (NASDAQ:FB), Global Payments Inc. (NYSE:GPN) is a exciting stock to watch out for.
Number of Hedge Fund Holders: 23 Scion Asset Management's Stake Value: $9.76 million Scion Asset Management's 13F Portfolio: 4.84%
Then there's Stellantis N.V. (NYSE:STLA), in which Michael Burry owns 600,00 shares with a price tag of $9.76 million, representing 4.84% of his Q1 2022 portfolio. The Dutch company makes and sells cars under a range of brands such as Vauxhall, Peugeot, Chrysler and Fiat.
On May 10, Berenberg analyst Adrian Yanoshik initiated coverage of Stellantis N.V. (NYSE:STLA) with a 'Buy' rating and €21 price target. The analyst expects tight volumes due to supply chain issues actually supporting pricing through a 'modest' recession, and feels a 'deep' order book will support positive free cash flow.
23 hedge funds held $1.25 billion worth of positions in Stellantis N.V. (NYSE:STLA) at the close of Q4 2021. This shows a slight downward trend from the previous quarter where 24 hedge funds were long on the company shares. Arrowstreet Capital held a $829.5 million stake in Stellantis N.V. (NYSE:STLA) consisting of 50.64 million shares, making it the firm's largest shareholder in the first quarter of 2022.
For 2021, Stellantis N.V. (NYSE:STLA) posted a revenue of $176.8 billion, which showed an increase of 78.55% increase from its 2020 revenue of $99 billion. As of May 19, shares of the firm are down 20.39% in the last 12 months.
Number of Hedge Fund Holders: 41 Scion Asset Management's Stake Value: $14.36 million Scion Asset Management's 13F Portfolio: 7.13%
Nexstar Media Group, Inc. (NASDAQ:NXST) is a Texas-based firm which provides digital media and television broadcasting services. It was given a 'Buy' rating by Deutsche Bank analyst Connor Murphy on May 12, who raised the firm's price target to $225 from $216, noting higher revenue, EBITDA, and free cash flow estimates after Nexstar released its Q1 results.
Nexstar Media Group, Inc. (NASDAQ:NXST) posted EPS of $6.01 for the first quarter, beating estimates by $1.70. The company pulled $1.21 billion in revenue for the quarter, beating estimates by $24.02 million and jumping 8.63% year-on-year. As of May 19, shares of Nexstar Media Group, Inc. (NASDAQ:NXST) have soared 19.41% in the last 12 months, and 14.97% in the year to date.
In the first quarter, Michael Burry's Scion Asset Management owned 76,000 shares of Nexstar Media Group, Inc. (NASDAQ:NXST) worth $14.36 million. Investors were bullish on the firm at the close of Q4 2021, where 41 hedge funds reported ownership of company shares at a value of $900.8 million. This is up from 38 hedge funds with $874 million worth of stakes in the company a quarter ago. With a $216.3 million stake, Seth Klarman's Baupost Group was the largest shareholder of Nexstar Media Group, Inc. (NASDAQ:NXST) in the first quarter of 2022.
Here is what investment firm Richie Capital Group had to say about Nexstar Media Group, Inc. (NASDAQ:NXST) in its Q1 2022 investor letter:
“Nexstar Media Group (NXST up 24.8%) – The television broadcasting and digital media company surged during the quarter after presenting at an investor conference where management pointed to a strong 2022 for both political advertising and retransmission. They have exposure to more than 80% of markets with competitive mid-term political races. NXST is developing new ad categories such as sports betting and they are focused on expanding digital ad revenue and providing digital solutions to local advertisers. Auto advertising will return in the fall as auto dealerships re-enter the market to sell their replenished inventory.”
Number of Hedge Fund Holders: 44 Scion Asset Management's Stake Value: $16.22 million Scion Asset Management's 13F Portfolio: 8.05%
Up next on Michael Burry's list of top stocks to buy is Ovintiv Inc. (NYSE:OVV), a Colorado-based energy firm which explores for and develops oil, natural gas and natural gas liquids products across the United States and Canada. On the back of soaring energy prices, shares of Ovintiv Inc. (NYSE:OVV) have jumped 33.21% in the year to date, and 85.23% in the last 12 months.
Truist analyst Neal Dingmann on May 11 lowered the firm's price target on Ovintiv Inc. (NYSE:OVV) to $72 from $80 and kept a 'Buy' rating on the company shares. He notes that increased selling pressure after the firm's below-consensus Q1 earnings was an 'overreaction', and presents investors with a good buying opportunity.
On May 9, Ovintiv Inc. (NYSE:OVV) reported its first quarter earnings, and posted EPS of $2.17, missing estimates by $0.32. Quarterly revenue of $1.97 billion also underperformed estimates by $302.9 million.
Scion Asset Management held 300,000 shares of Ovintiv Inc. (NYSE:OVV) in the first quarter with a price tag of $16.22 million. Of the 900+ hedge funds tracked by Insider Monkey, 44 held positions in the firm at the close of Q4 2021, with a combined worth of $1.07 billion. The same number of hedge funds were bullish on the company shares a quarter ago as well.
Miller Value Partners, an investment firm, talked about many stocks in its Q4 2021 investor letter, and Ovintiv Inc. (NYSE:OVV) was one of them. The fund said:
“The outlook for high multiple favorites depends to a great degree on interest rates. Warren Buffett likened interest rates to the force of gravity for asset prices. At current low levels, high valuations on long-duration assets can be justified. If interest rates move up, the adjustment will be painful. Market action early in the new year, with the swift moves up in interest rates and down in the Nasdaq, offers a taste of the medicine.
We underwrite all our names to have sufficient upside even if risk-free rates move up to 3% (a scenario, not a forecast!). As we evaluate the opportunity set, we find more attractive prospects in the classic value names. We often hear that people think value investing is dead, which only strengthens our conviction. Our gross exposure to classic value has risen from 44% a year ago to 62% currently.
One new name that illustrates the potential we see is Ovintiv (OVV), an oil and gas producer. We’ve seen a huge shift in the industry away from growth towards returns on capital, cash generation, and capacity discipline. OVV exemplifies the change.
OVV’s new CEO Brendan McCracken says: “We are at the forefront of driving innovation to produce oil and gas from shale both profitably and sustainably. We will generate superior returns and free cash flow by continuously improving capital efficiency and expanding margins while driving down emissions. We will deliver that value to our shareholders through disciplined capital allocation.”
Based on crude at $65 (well below the current $83.82 as of 1/14/22), the company guides to free cash flow generation of $11B over the next 5 years and $21B in the next 10 years. The company’s market cap is currently $10B and its enterprise value is $16B. It’s returning a significant portion of the capital to shareholders. If crude averages $70 in 2022, the company will return $700M to shareholders (in addition to paying down a significant amount of debt), which implies a yield of 7% at the current $39.53 price. In other words, there’s a good shot the company will return nearly its entire market cap to shareholders over the next 5 years.”
Number of Hedge Fund Holders: 224 Scion Asset Management's Stake Value: $17.78 Scion Asset Management's 13F Portfolio: 8.83%
Michael Burry initiated his position in Meta Platforms, Inc. (NASDAQ:FB) during the first quarter of 2022 with 80,000 shares valued at $17.78 million. This represented 8.83% of the Big Short investor's total portfolio.
Evercore ISI analyst Mark Mahaney on April 28 kept an 'Outperform' rating on Meta Platforms, Inc. (NASDAQ:FB) shares and lowered the price target to $325 from $350. He notes that the firm is facing three key concerns: ad platform impairment owing to Apple's privacy changes, monetization challenges related to Reels, and competition from TikTok. However, he is increasingly confident the firm can address these issues successfully, and sees shares as "truly compelling" at current levels.
For the first quarter, Meta Platforms, Inc. (NASDAQ:FB) posted an EPS of $2.72, beating estimates by $0.21. Revenue of $27.9 billion for the quarter was below estimates by roughly $314 million. As part of the market sell-off in tech, shares of the Meta have dropped 43.21% in the year to date as of May 19.
Meta Platforms, Inc. (NASDAQ:FB) stock was held by 224 hedge funds at the close of Q4 2021, with an aggregate holding value of $31.8 billion. This is down from 248 hedge funds in the preceding quarter. Adam Capital was the largest shareholder of Meta Platforms, Inc. (NASDAQ:FB) during the first quarter of 2022, with a massive stake worth $48.66 billion.
Investment firm Vulcan Value Partners talked about Meta Platforms, Inc. (NASDAQ:FB) in its Q1 2022 investor letter, stating:
“Meta Platforms Inc., the parent company of Facebook, reported excellent operating results in 2021. Its revenue increased 37%, operating earnings increased 40%, and the company generated $40 billion of free cash flow. Despite these excellent results, Meta experienced extreme volatility in its stock price during the first quarter. We believe that two factors are responsible for this volatility. First, the company quantified the headwind to revenue from Apple’s recent privacy changes in the amount of approximately $10 billion for 2022. Meta is rebuilding its advertising technology, and we believe the long-term headwinds from Apple’s privacy changes will be limited because Meta will create a suitable solution. Second, Meta continues to invest heavily into its Reality Labs segment, also known as the metaverse. While we believe the metaverse presents great opportunity for Meta, we are not assigning any value to it in our valuation work. While 2022 may be challenging for Meta, the company’s competitive advantages are still intact, and the company trades at a significant discount to our estimate of its intrinsic value. Despite our concerns about a possible recession, we expect Meta to return to double-digit bottom line growth next year.”
Along with Amazon.com, Inc. (NASDAQ:AMZN) and Alphabet Inc. (NASDAQ:GOOG), Meta Platforms, Inc. (NASDAQ:FB) is on the radar of institutional investors.
Click to continue reading and see Michael Burry's 2022 Portfolio: Top 5 Stock Picks.
15 Largest Biotech Companies in the world
15 Best Technology Stocks To Buy Now
10 Best Cybersecurity Stocks To Buy Now
Disclosure. None. Michael Burry's 2022 Portfolio: Top 10 Stock Picks is originally published on Insider Monkey.
6 4 Associated CointreeAlex on 01/02/2022 - 14:07 cointree.com (142...Read More