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Michael Burry

Scion Asset Management, the second hedge fund founded by Dr. Michael Burry of ‘Big Short’ fame, made its US equity portfolio highly concentrated with very limited exposure to the financial sector heading into the second quarter. This information was uncovered from the fund’s latest 13F filing submitted with the Securities and Exchange Commission (SEC).  According to the filing, Scion’s US equity portfolio at the end of March was worth $51.1 million and consisted of long positions in only eight stocks. In comparison, Scion’s US equity portfolio was worth nearly $80 million and consisted of long positions in 14 stocks at the end of 2015. The filing also revealed that whereas the fund sold its entire stake in nine stocks and reduced its holding in two stocks during the first quarter, it made additional purchases in only one stocks and initiated a stake in only three stocks during that period. The most interesting information that came out of Scion’s latest 13F filing was that Dr. Burry suddenly became extremely bearish on banking stocks during the first quarter, selling all of Scion’s holdings in them during that period.  In this post, we will take a look at four well-known companies in which Scion sold its entire stake during the first quarter and will also discuss its top holding going into the second quarter.

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We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).

Michael Burry
Michael Burry
Scion Asset Management

Three closed positions in Banking Stocks

Bank of New York Mellon Corp (NYSE:BK)

Let’s start with Bank of New York Mellon Corp (NYSE:BK), in which Scion held 100,000 shares at the end of 2015, but dumped the position during the first quarter. Relative to the performance of other banking stocks, the stock of New York Mellon Corp (NYSE:BK) performed rather well during the first quarter by losing only 10% of its value during that period. Moreover, it is also amongst the few stocks in the banking sector, which have managed to recover from the first quarter beating and currently trades flat for 2016. A large part of the gains that the stock has seen in the current quarter came in anticipation of the bank’s first quarter results. Since the EPS of $0.74 on revenue of $3.74 billion that the bank reported for the quarter were slightly better than analysts’ estimate of EPS of $0.68 on revenue of $3.74 billion, Bank of New York Mellon Corp (NYSE:BK)’s stock has so far managed to hold on to the gains it made prior to the bank’s earnings announcement. On May 11, analysts at Credit Suisse reiterated their ‘Hold’ rating on the stock. Nelson Peltz‘s Trian Partners, whose co-founder Ed Garden is part of the bank’s Board, inched up its stake in Bank of New York Mellon Corp by 3% to 31.283 million shares during the first quarter.

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