Michael Burry wasn’t always planning to be an investor. In fact he is a physician, having earned his M.D. from the Vanderbilt University School of Medicine. Before founding Scion, he was doing his residency in neurology at Stanford Hospital and Clinics and investing was more of a hobby he was doing at night. He was regularly posting on message boards on the stock discussion site Silicon Investors since 1996 and his successful stock picks attracted the attention of the future investors of Scion Capital, which included Vanguard and Joel Greenblatt of Gotham Asset Management .
Due to his to successful bets (at least those that we know of), Michael Burry’s net worth is estimated at around $250 million. Unfortunately not much is known about him, or his investments, since he rarely talks to the media and is known for a rather awkward and anti-social behavior. It was even reported that he has self-diagnosed with Asperger’s disease. His anti-social behavior is believed to be one of the reasons why he couldn’t raise more funds for Scion Capital in 2008.
In an article on MSN Money in 2000, Michael Burry outlined his investment strategy. He is a value investor, following the principles of Ben Graham. He said that he picks upopular companies when “they look like road kill” and sells them when they have been “polished up a bit”. He focuses on research, which, in his own words, is his weapon of choice. Burry looks to understand the company’s value before investing in it and his stock picking is 100% based on the concept of the “margin of safety” introduced by Ben Graham and David Dodd in “Security Analysis.”
Bury is not picky when it comes to the size of the company, or the industry it operates in, although he likes out-of-favor industries, because they are the best at providing good stocks at big discounts. He focuses on free cash flow and enterprise value to determine whether a stock is worth the attention and looks at other items such as off-balance sheet items. Burry ignores price-earnings ratios and considers return of equity to be deceptive. In addition to value investing, Burry also sometimes invests in asset plays and arbitrage opportunities.
In addition to focusing on fundamentals, Burry also likes to mix in some technical analysis in his stock picking process. In his old posts on Silicon Investors, he mentioned using technical analysis in trading coffee futures and some stocks, such as Apple Inc (NASDAQ:AAPL) and Oracle Corporation (NASDAQ:ORCL). In his article on MSN Money he said that he prefers to buy within 10% to 15% of a 52-week low and usually sells the stock if it breaks to a new low.
On the next page, we will take a look at some of Michael Burry’s investments, including his bet on water.
