In this article, we discuss the 10 best stocks to buy according to Michael Burry.
Michael Burry, the chief of California-based Scion Asset Management, manages more than $2 billion in assets with investments concentrated in the consumer goods, services, and technology sectors. The top five holdings of his hedge fund, according to the latest data filed with the regulatory body at the end of June 2021, represent more than 38% of the entire portfolio, with technology companies like Facebook, Inc. (NASDAQ: FB) and Alphabet Inc. (NASDAQ: GOOG) topping the list alongside retail giant Walmart Inc. (NYSE: WMT).
Six of the top ten holdings in the portfolio are new additions. Coupled with the fact that Burry sold off stakes in 14 companies between March and June this year, most of which featured in the top picks of the hedge fund during the first quarter of 2021, it would appear that the famed investor is embarking on a new investment strategy to cater to the changing market dynamics following mass COVID-19 vaccinations. A cursory glance at the portfolio indicates Burry has been loading up on technology and shipping stocks while selling energy-related equities.
The top investment picks of Burry are a good indicator of his overall view on the economy. The investor has become one of the most famous personalities on Wall Street by banging on the inflation drum – some of his most famous crash predictions can be accessed here. During the 2008 financial crisis, he made billions by betting against subprime mortgages, a feat that later inspired a Hollywood film as well. Bury has a net worth of $300 million and his hedge fund has a ten-year return of 326%, one of the most successful on Wall Street.
The success of Burry is an exception in the world of finance that has struggled to cope with technological disruption. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Michael Burry of Scion Asset Management
Our Methodology
With this context in mind, here is our list of the 10 best stocks to buy according to Michael Burry. These were listed according to the investment portfolio of Scion Asset Management at the end of the second quarter of 2021. The number of hedge holders in each company are mentioned alongside other details, like analyst ratings and basic business fundamentals, for further clarity. Data from the 873 hedge funds tracked by Insider Monkey was used for this purpose.
Best Stocks to Buy According to Michael Burry
10. The GEO Group, Inc. (NYSE: GEO)
Number of Hedge Fund Holders: 15
The GEO Group, Inc. (NYSE: GEO) is placed tenth on our list of 10 best stocks to buy according to Michael Burry. The firm operates as a real estate investment trust and is based in Florida. Latest filings reveal that Scion Asset Management owned 2.5 million shares in the company at the end of June 2021 that are worth $17.8 million. This represents 0.85% of the investment portfolio of the Burry-led firm. The GEO Group is a new addition to the portfolio compared to the previous quarter.
On June 8, investment advisory Wedbush initiated coverage of The GEO Group, Inc. (NYSE: GEO) stock with a Neutral rating and a price target of $7. Henry Coffey, an analyst at the firm, issued the ratings update.
At the end of the second quarter of 2021, 15 hedge funds in the database of Insider Monkey held stakes worth $74 million in The GEO Group, Inc. (NYSE: GEO), up from 13 in the previous quarter worth $72 million.
Just like Facebook, Inc. (NASDAQ: FB), Alphabet Inc. (NASDAQ: GOOG), and Walmart Inc. (NYSE: WMT), The GEO Group, Inc. (NYSE: GEO) is one of the best stocks to buy according to Michael Burry.
In its Q1 2021 investor letter, Miller Value Partners, an asset management firm, highlighted a few stocks and The GEO Group, Inc. (NYSE: GEO) was one of them. Here is what the fund said:
“GEO Group (GEO) declined 9.8% during the period as President Biden’s Executive Order directing the Department of Justice not to renew contracts with private prisons at the Federal level offset solid Q4 results. GEO reported Q4 revenue of $578.1M, in-line with consensus while EBITDA of $107.9M topped estimates of $87.7M by 23%. Adjusted Funds from Operations (AFFO) of $0.62/share fell 6% Y/Y and provided coverage of 2.5x on the quarterly dividend of $0.25/share (13.5% annualized yield). The company exited the quarter with ample liquidity of $420M and remains committed to paying down $75M-$100M of debt annually. Management introduced 2021 guidance with revenue of $2.24Bn-$2.27Bn, EBITDA of $386M-$400M, and AFFO of $1.98-$2.08, all of which assumes Bureau of Prison contracts with optional expiration periods in 2021 will not be renewed. Additionally, GEO announced a $200M convertible notes offering due 2026 with net proceeds funding the redemption of the 5.875% unsecured notes due 2022.”
9. Ovintiv Inc. (NYSE: OVV)
Number of Hedge Fund Holders: 40
Ovintiv Inc. (NYSE: OVV) is ranked ninth on our list of 10 best stocks to buy according to Michael Burry. The company develops, producers, and markets oil and natural gas. It is headquartered in Colorado. Latest data shows that Scion Asset Management owned 600,000 shares in the company at the end of the second quarter of 2021. This represents 0.9% of the portfolio and is worth $18.8 million. This is also another new addition to the portfolio compared to the first quarter of 2021.
On August 17, investment advisory Bank of America reinstated coverage of Ovintiv Inc. (NYSE: OVV) stock with a Buy rating and a price target $38, noting that the firm had a line of sight to accelerate debt reduction that will transfer value to the equity.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Two Sigma Advisors is a leading shareholder in Ovintiv Inc. (NYSE: OVV) with 3.9 million shares worth more than $123 million.
In addition to Facebook, Inc. (NASDAQ: FB), Alphabet Inc. (NASDAQ: GOOG), and Walmart Inc. (NYSE: WMT), Ovintiv Inc. (NYSE: OVV) is one of the best stocks to buy according to Michael Burry.
In its Q4 2020 investor letter, Davis Funds, an asset management firm, highlighted a few stocks and Ovintiv Inc. (NYSE: OVV) was one of them. Here is what the fund said:
“Energy holdings in Ovintiv also experienced detracted performance, as oil demand collapsed due to the pandemic. With approximately 70% of oil demand used for transportation, the decline in miles driven (i.e., U.S. miles driven are down 11% in 2020) and the far bigger 60–70% decline in global air passenger traffic led to a dramatic drop in oil prices.
It is our expectation that oil demand will remain weak for the foreseeable future, as flying and driving slowly recover, and that over the long term, electric vehicles and renewable energy will also decrease demand for fossil fuels. As a result, we sold out of our energy positions in 2020. We redeployed the assets in other sectors such as financial services that also saw falling stock prices, but where we had stronger conviction that the long-term health of their business was strong.”
8. Discovery, Inc. (NASDAQ: DISCA)
Number of Hedge Fund Holders: 44
Discovery, Inc. (NASDAQ: DISCA) is a New York-based media company. It is placed eighth on our list of 10 best stocks to buy according to Michael Burry. Regulatory filings by Scion Asset Management reveal that the firm owned 855,084 shares in the media company at the end of June 2021. These are worth $24.7 million and represent 1.19% of the portfolio. The investment firm bought stakes in the company between April and June, according to the filings.
On August 4, investment advisory Deutsche Bank kept a Buy rating on Discovery, Inc. (NASDAQ: DISCA) stock but lowered the price target to $40 from $55, forecasting lower domestic network affiliate revenue for the firm in the second quarter.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm DE Shaw is a leading shareholder in Discovery, Inc. (NASDAQ: DISCA) with 5.6 million shares worth more than $165 million.
Along with Facebook, Inc. (NASDAQ: FB), Alphabet Inc. (NASDAQ: GOOG), and Walmart Inc. (NYSE: WMT), Discovery, Inc. (NASDAQ: DISCA) is one of the best stocks to buy according to Michael Burry.
In its Q1 2021 investor letter, Mayar Capital, an asset management firm, highlighted a few stocks and Discovery, Inc. (NASDAQ: DISCA) was one of them. Here is what the fund said:
“We also sold most of our holdings in Discovery as the stock price continued to increase to new highs. However, in late March the stock declined considerably when brokers liquidated holdings by Archegos Capital (see above in General Commentary) to satisfy margin calls. That brought the stock price down to levels that we found attractive, and we bought back a significant amount of the shares that we had sold earlier that month.”
7. CVS Health Corporation (NYSE: CVS) CALL
Number of Hedge Fund Holders: 67
CVS Health Corporation (NYSE: CVS) is a Rhode Island-based health service provider. It is ranked seventh on our list of 10 best stocks to buy according to Michael Burry. Scion Asset Management owned 525,300 shares in the health company at the end of June 2021, representing 2.1% of the portfolio. These shares are worth $43.8 million. Burry increased the stake of the investment firm in CVS Health by 32% in the second quarter when compared to the first quarter of the year.
On August 5, investment advisory Deutsche Bank maintained a Buy rating on CVS Health Corporation (NYSE: CVS) stock and raised the price target to $101 from $95, appreciating the solid second quarter results from the firm.
Out of the hedge funds being tracked by Insider Monkey, Chicago-based firm Harris Associates is a leading shareholder in CVS Health Corporation (NYSE: CVS) with 8.5 million shares worth more than $713 million.
Facebook, Inc. (NASDAQ: FB), Alphabet Inc. (NASDAQ: GOOG), and Walmart Inc. (NYSE: WMT) are some of the best stocks to buy according to Michael Burry., along with CVS Health Corporation (NYSE: CVS).
In its Q1 2021 investor letter, Vulcan Value Partners, an asset management firm, highlighted a few stocks and CVS Health Corporation (NYSE: CVS) was one of them. Here is what the fund said:
“We sold our position in CVS Health Corp. to allocate capital to companies with larger margins of safety. During the five years that we owned CVS Health Corp., the company acquired Aetna. At the time, we also owned Aetna, and we believed the combination of the two companies would create additional value. After the acquisition, its business performance has been disappointing. We reevaluated our assumptions and determined its value has not grown.”
6. Cardinal Health, Inc. (NYSE: CAH) CALL
Number of Hedge Fund Holders: 40
Cardinal Health, Inc. (NYSE: CAH) is placed sixth on our list of 10 best stocks to buy according to Michael Burry. The firm provides healthcare services and products. It operates from Ohio. Burry-led Scion Asset Management owned 857,700 shares in the company at the end of the second quarter of 2021. These are worth $48.9 million and represent 2.35% of the portfolio. According to the latest data, this is a new addition to the portfolio of the investment firm when compared to the first quarter of 2021.
In earnings results for the fourth fiscal quarter, posted on August 5, Cardinal Health, Inc. (NYSE: CAH) reported earnings per share of $0.77, missing market estimates by $0.43. The revenue over the period was $42 billion, up 16% year-on-year and beating estimates by $2.3 billion.
At the end of the second quarter of 2021, 40 hedge funds in the database of Insider Monkey held stakes worth $897 million in Cardinal Health, Inc. (NYSE: CAH), up from 39 in the previous quarter worth $967 million.
Facebook, Inc. (NASDAQ: FB), Alphabet Inc. (NASDAQ: GOOG), and Walmart Inc. (NYSE: WMT) are some of the best stocks to buy according to Michael Burry., just like Cardinal Health, Inc. (NYSE: CAH).
5. Walmart Inc. (NYSE: WMT) CALL
Number of Hedge Fund Holders: 71
Walmart Inc. (NYSE: WMT) is ranked fifth on our list of 10 best stocks to buy according to Michael Burry. The company operates in the retail business and is headquartered in Arkansas. At the end of June 2021, Burry, through Scion Asset Management, owned CALL options on 378,600 shares in the retailer that are worth $53.3 million. This represents 2.56% of the portfolio. Regulatory filings reveal that Walmart is a new addition to the Scion portfolio compared to the first quarter of 2021.
On August 18, investment advisory Cowen reiterated an Outperform rating on Walmart Inc. (NYSE: WMT) stock and raised the price target to $175 from $170, noting that the momentum in food and other categories was supporting traffic growth for the firm.
Out of the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in the firm with 12.6 million shares worth more than $1.7 billion.
4. The Kraft Heinz Company (NASDAQ: KHC) CALL
Number of Hedge Fund Holders: 33
The Kraft Heinz Company (NASDAQ: KHC) is a food and beverage maker based in Pennsylvania. It is placed fourth on our list of 10 best stocks to buy according to Michael Burry. Latest data reveals that Scion Asset Management owned CALL options on more than 1.4 million shares in the food and beverage maker at the end of June 2021 that are worth over $58 million and represent 2.79% of the portfolio. The investment firm has increased stake in the firm by 22% when compared to the first quarter of 2021.
On August 4, The Kraft Heinz Company (NASDAQ: KHC) reported for the second quarter, posting earnings per share of $0.78, beating market estimates by $0.06. The revenue over the three months was $6.6 billion, beating predictions by $70 million.
Out of the hedge funds being tracked by Insider Monkey, Nebraska-based investment firm Berkshire Hathaway is a leading shareholder in The Kraft Heinz Company (NASDAQ: KHC) with 325 million shares worth more than $13 billion.
In its Q4 2020 investor letter, Berkshire Hathaway highlighted a few stocks and The Kraft Heinz Company (NASDAQ: KHC) was one of them. Here is what the firm said:
“We exclude our Kraft Heinz holding — 325,442,152 shares — (In the list of 15 common stock investments that at yearend were our largest in market value) because Berkshire is part of a control group and therefore must account for that investment using the “equity” method. On its balance sheet, Berkshire carries the Kraft Heinz holding at a GAAP figure of $13.3 billion, an amount that represents Berkshire’s share of the audited net worth of Kraft Heinz on December 31, 2020.
Berkshire and its subsidiaries hold investments in certain businesses that are accounted for pursuant to the equity method. Currently, the most significant of these is our investment in the common stock of The Kraft Heinz Company (“Kraft Heinz”). Kraft Heinz is one of the world’s largest manufacturers and marketers of food and beverage products, including condiments and sauces, cheese and dairy, meals, meats, refreshment beverages, coffee and other grocery products. Berkshire currently owns 325,442,152 shares of Kraft Heinz common stock representing 26.6% of the outstanding shares.
We recorded equity method earnings from our investment in Kraft Heinz of $95 million in 2020, $493 million in 2019 and losses of approximately $2.7 billion in 2018. Equity method earnings (losses) included the effects of goodwill and identifiable intangible asset impairment charges recorded by Kraft Heinz. Our share of such charges was approximately $850 million in 2020, $450 million in 2019 and $3.7 billion in 2018. We received dividends from Kraft Heinz of $521 million in each of 2020 and 2019 and $814 million in 2018, which we recorded as reductions in our carrying value.
Shares of Kraft Heinz common stock are publicly-traded and the fair value of our investment was approximately $11.3 billion at December 31, 2020 and $10.5 billion at December 31, 2019. The carrying value of our investment was approximately $13.3 billion at December 31, 2020 and $13.8 billion at December 31, 2019. As of December 31, 2020, the carrying value of our investment exceeded the fair value based on the quoted market price by $2.0 billion (15% of carrying value). In light of this fact, we evaluated our investment in Kraft Heinz for impairment. We utilize no bright-line tests in such evaluations. Based on the available facts and information regarding the operating results of Kraft Heinz, our ability and intent to hold the investment until recovery, the relative amount of the decline and the length of time that fair value was less than carrying value, we concluded that recognition of an impairment loss in earnings was not required. However, we will continue to monitor this investment and it is possible that an impairment loss will be recorded in earnings in a future period based on changes in facts and circumstances or intentions.”
3. McKesson Corporation (NYSE: MCK) CALL
Number of Hedge Fund Holders: 51
McKesson Corporation (NYSE: MCK) is a Texas-based healthcare and pharmaceutical company. It is ranked third on our list of 10 best stocks to buy according to Michael Burry. Regulatory filings by Scion Asset Management reveal that Burry owned CALL contracts on 682,400 shares in the healthcare company at the end of the second quarter of 2021. This represents 6.26% of the portfolio and is worth $130 million. The stake is a new addition to the portfolio compared to the first quarter of 2021.
On August 5, investment advisory Deutsche Bank kept a Buy rating on McKesson Corporation (NYSE: MCK) stock and raised the price target to $261 from $237, highlighting that the company raised guidance and saw strength in every business segment in the first fiscal quarter.
Out of the hedge funds being tracked by Insider Monkey, New York-based firm Pzena Investment Management is a leading shareholder in McKesson Corporation (NYSE: MCK) with 3.1 million shares worth more than $609 million.
2. Alphabet Inc. (NASDAQ: GOOG) CALL
Number of Hedge Fund Holders: 155
Alphabet Inc. (NASDAQ: GOOG) is placed second on our list of 10 best stocks to buy according to Michael Burry. The company operates in the internet and technology business. It is headquartered in California. Scion Asset Management owned CALL options on 91,900 shares in the technology company at the end of the second quarter of 2021. This stake is worth more than $230 million and represents over 11% of the portfolio. At the end of June 2021, Burry had increased stake in the firm by 15% compared to the first quarter of 2021.
On July 28, investment advisory Wedbush reiterated an Outperform rating on Alphabet Inc. (NASDAQ: GOOG) stock and raised the price target to $3,424 from $3,127, underlining that the advertisement and cloud market were accelerating and expected to benefit the company.
Out of the hedge funds being tracked by Insider Monkey, London-based investment firm TCI Fund Management is a leading shareholder in the firm with 2.9 million shares worth more than $7.3 billion.
In its Q1 2021 investor letter, Artisan Partners, an asset management firm, highlighted a few stocks and Alphabet Inc. (NASDAQ: GOOG) was one of them. Here is what the fund said:
“Large-cap tech companies have been resilient through the pandemic—Alphabet among them. A top contributor, Alphabet’s Play Store and Google Cloud are in demand as businesses accelerate online activity which, along with strong YouTube user growth, is helping stabilize temporarily weaker search ad revenue trends. Through the lens of our disciplined bottom-up research process, we view Alphabet as one of the best businesses in the world, capable of expanding revenues at a rapid rate for years to come, with a bullet proof balance sheet and an average asking price. It’s a name we’ve owned since 2012 and for which we continue to have high hopes regarding future prospects.”
1. Facebook, Inc. (NASDAQ: FB) CALL
Number of Hedge Fund Holders: 266
Facebook, Inc. (NASDAQ: FB) is ranked first on our list of 10 best stocks to buy according to Michael Burry. The firm owns and runs social media platforms and operates from California. Latest filings show that Scion Asset Management owned CALL options on 941,200 shares in the social media firm at the end of the second quarter of 2021, representing 15.7% of the portfolio. The shares are worth more than $327 million. Burry has increased stake in the firm by 72% compared to the first quarter of 2021.
On July 29, investment advisory Evercore maintained an Outperform rating on Facebook, Inc. (NASDAQ: FB) stock and raised the price target to $450 from $400, noting that the long-term view on the stock was bullish.
At the end of the second quarter of 2021, 266 hedge funds in the database of Insider Monkey held stakes worth $42 billion in Facebook, Inc. (NASDAQ: FB), up from 257 in the preceding quarter worth $40 billion.
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Facebook, Inc. (NASDAQ: FB) was one of them. Here is what the fund said:
“We continued to keep our learnings from 2020 in mind during the quarter as we sought to increase the up capture of the portfolio. We also made adjustments to the portfolio’s top 10 holdings to increase the participation of select stocks, including Facebook, while trimming our weighting to stable names, which now represent 47% of the portfolio. Our repositioning has been encouraging so far with the portfolio performing better on up days in the market while maintaining good down capture during more turbulent sessions.”
You can also take a peek at 10 Best Dividend Stocks to Buy According to Michael Burry and 10 Best Cheap Stocks to Buy According to Michael Burry.
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Disclosure. None. 10 Best Stocks to Buy According to Michael Burry is originally published on Insider Monkey.
