Over the past few years, Michael Burry has gained more media attention with his recession warnings and market crash “predictions” than he did for accurately foreseeing the 2008 financial crisis. But his persistent warnings about recession and market crashes never realized, denting his reputation as an expert and hedge fund manager.
Were Michael Burry’s Recession Warnings Wrong?
A cursory look at Burry’s portfolio moves shows that he’s becoming more fickle than ever, constantly buying stocks and then selling them after a few months. In 2022, when the inflation storm was at its peak and the market was panicking, Burry tweeted:
“As I said about 2008, it is like watching a plane crash. It hurts, it is not fun, and I’m not smiling.”
But the crash Burry was watching never happened.
In August 2023, Wall Street Journal analyzed Michael Burry’s recession warnings and found that he’s made at least five “dire” market predictions. But that’s not the news. The news is that each time he predicted something horrifying about the market, the S&P 500 saw positive returns over the next six months. Six-month average annualized gain posted by the S&P 500 following these five Burry predictions was 34%.
“Overconfidence” or Something Else?
Why are Michael Burry’s market predictions not accurate anymore? Researchers Jerker Denrell and Christina Fang in 2010 published an interesting research paper titled Predicting the Next Big Thing: Success as a Signal of Poor Judgment. The paper talked about the reasons why experts who make accurate predictions about “extreme” events often follow up with more, and fail. The paper highlighted several reasons behind this trend, but one of these was overconfidence.
“An alternative explanation of our results is that a successful prediction generates overconfidence. Overconfident individuals, who overestimate the precision of their private information relative to publicly available information, are likely to make less accurate predictions. For example, Hilary and Menzly (2006) show that analysts who have predicted earnings more accurately than the median analyst in the previous four quarters tend to be simultaneously less accurate and further from the consensus in their subsequent predictions.”
Despite his recession warnings not playing out as he predicted, Michael Burry remains one of the market geniuses whose moves are watched keenly by investors. For this article we scanned Michael Burry’s Q1’2024 portfolio and picked some notable stocks he sold in the quarter. These are just five stocks that he sold in the March quarter. Insider Monkey had published a long list of stocks dumped by Burry in the first three months of 2024. Some notable names include Amazon.com Inc (NASDAQ:AMZN), Alphabet Inc Class A (NASDAQ:GOOGL) and Oracle Corp (NYSE:ORCL). Click to see 7 Stocks Michael Burry is Selling in 2024.
Big Lots Inc (NYSE:BIG)
Number of Hedge Fund Investors: 10
Discount retailer Big Lots Inc (NYSE:BIG) was a disappointment for Michael Burry. The Big Short investor had bought 225,000 shares of Big Lots Inc (NYSE:BIG) back in the fourth quarter of 2023. The stock has lost about 53% in value over the past one year, and 9% in the last six months.
GEN Restaurant Group Inc (NASDAQ:GENK)
Number of Hedge Fund Investors: 10
California-based restaurant company GEN Restaurant Group Inc (NASDAQ:GENK) is one of the stocks Michael Burry is selling in 2024. Scion Asset Management sold all 154,142 shares of GEN Restaurant Group Inc (NASDAQ:GENK) it had owned in the fourth quarter of 2023.
Wasatch Micro Cap Value Strategy stated the following regarding GEN Restaurant Group, Inc. (NASDAQ:GENK) in its fourth quarter 2023 investor letter:
“GEN Restaurant Group, Inc. (NASDAQ:GENK) was the strategy’s greatest detractor. The company owns GEN Korean BBQ, a fast-growing experiential restaurant chain operating in seven states of the U.S. GENK offers customers a unique dining experience where they serve as their own chefs, preparing meals on embedded grills in the center of each table. The extensive menu consists of traditional Korean and Korean-American food, including high-quality meats, seafood and mixed vegetables. We bought GENK as an initial public offering (IPO). Afterward, we purchased additional shares on the open market. During the year prior to the IPO, we met with the management team and visited the restaurants several times—and our qualitative assessment was extremely positive. In terms of our quantitative assessment, we were impressed with GENK’s contribution margins in the vicinity of 20% and its EV-to-EBITDA valuation, which was below high-quality peers in the restaurant business. For the most part, the company’s fundamentals have progressed in line with our initial expectations. And every one of GENK’s 36 locations generates positive cash flow. But small operational improvements are needed in seven locations. Unfortunately, investors are inherently impatient with a newly public company that isn’t firing on all cylinders. While we’re disappointed that GENK stumbled in the aftermath of its IPO, we remain comfortable investing alongside company insiders, who still own 87% of the outstanding shares.”
Qurate Retail Inc Series A (NASDAQ:QRTEA)
Number of Hedge Fund Investors: 24
Michael Burry sold all 600,000 Qurate Retail Inc Series A (NASDAQ:QRTEA) shares he had in his portfolio in the first quarter of 2024.
Silver Ring Value Partners stated the following regarding Qurate Retail, Inc. (NASDAQ:QRTEA) in its fourth quarter 2023 investor letter:
“Qurate Retail, Inc. (NASDAQ:QRTEA): I let our remaining call options expire in January, and have not replaced them. The company is now a turnaround that is dealing with a stretched balance sheet and a potential recession. I have not yet been able to discern material evidence that the turnaround is already succeeding. Meanwhile, if the cycle were to occur sooner and be deeper than currently expected, the equity would quickly become worthless.
It’s tempting to double-down on one’s bets especially when there is such a huge amount of upside if the company is able to turn itself around and avoid bankruptcy. After all, there is still the chance of the equity being worth $10+ vs. the under $1 share price. However, merely being lured by the large upside is a mistake – lottery tickets also have huge upside relative to the price paid, but they are known for their negative expected value. At this point I don’t have any differentiated insights that would allow me to assign probabilities better than the market to the various scenarios, and so I am going to avoid gambling and pass.
I will keep monitoring the situation and if there are signs that the turnaround is succeeding, I would be happy to revisit my decision even at a much higher price. In turnarounds, the best expected return is usually obtained when the odds have shifted in the company’s favor even if the upside has been reduced.”
Like QRTEA, Burry is also selling Amazon.com Inc (NASDAQ:AMZN), Alphabet Inc Class A (NASDAQ:GOOGL) and Oracle Corp (NYSE:ORCL).
Nexstar Media Group Inc (NASDAQ:NXST)
Number of Hedge Fund Investors: 31
Michael Burry had started cutting his stakes in Nexstar Media Group Inc (NASDAQ:NXST) in the fourth quarter of 2023. But in the March quarter this year, he sold the entire 32,500 shares of the Texas-based media company.
Over the past one year the stock has gained about 5.7%.
Burr is also dumping major names like Amazon.com Inc (NASDAQ:AMZN), Alphabet Inc Class A (NASDAQ:GOOGL) and Oracle Corp (NYSE:ORCL).
Bruker Corp (NASDAQ:BRKR)
Number of Hedge Fund Investors: 32
Scientific instruments company Bruker Corp (NASDAQ:BRKR) is in our list of the stocks Michael Burry is selling in 2024. Burry had bought 50,000 shares of Bruker Corp (NASDAQ:BRKR) in the last quarter of 2023, only to sell all of them in the following quarter. Over the past six months Bruker shares are up 22%.
These were just 5 stocks Michael Burry sold in 2024. He’s selling many more this year.
Click to see 7 More Stocks Michael Burry is Selling in 2024.
Disclosure. None.