Summary
- Michael Burry's positions as of Dec 31, 2021 were reported in SEC filings.
- Positions in the two private prison operators are maintained.
- Four new positions including IMPX, the SPAC taking Harley-Davidson's electric bike division public.
I have been following Michael Burry's career as a value investor since before he rose to fame for a successful short on the mortgage market during the 2008-2009 financial crisis. He has had ups and downs during that time, with underperformance coming from some deep value stocks that never rebounded (Tailored Brands) and strong performance from deep value stocks that rebounded more than anyone could have reasonably expected them to (GameStop (GME)).
While I don't slavishly follow any investors positions, I do think it is worth a look once a quarter to see what Michael Burry has been buying. The table below shows his positions as reported to the SEC as of December 31, 2021, the most recent reportable date, as released publicly on February 14th, 2022. This includes all long positions that are publicly traded in the US, it doesn't include short positions, foreign positions, or unlisted investments.
The first thing to note is that the private prison operators remain in the portfolio, where they have been for some time. Given he has two out of six positions in the sector, it is obviously a reasonably high conviction place to deploy capital for Dr. Burry. Both CXW and GEO have been hurt by political rhetoric regarding incarceration rates and private prisons, but there have been renewals (including Federal renewals) in the space since the Biden administration came to power, so the rumors of their demise do seem exaggerated (or at least somewhat premature).
AEA-Bridges Impact Corp.
This is the new position that I find the most interesting, so I'm spending the most time on it. This is a special purpose acquisition company [SPAC] that has agreed to take the electric motorcycle division of Harley-Davidson (HOG) public. The shares initially jumped after the announcement, but have since settled down slightly below the trust value. That $10 level is key, because like every SPAC, holders of IMPX before the vote will be able to redeem their shares for the $10 trust value. That provides a pretty distinct level of downside protection on the shares until the redemption deadline. I suspect Michael Burry was attracted by this "heads-I-win, tails-I-don't lose" dynamic.
The firm, which will be called Livewire after the brand Harley-Davidson is using for their electric bikes, will still have the vast majority of its shares owned by the venerable motorcycle maker. Given the strategic value to the parent of continuing to own that majority stake (presuming electric bikes are the future, which seems likely) I doubt that those shares will come on the market. That will mean that post deal liquidity will be relatively limited for a company of this size, especially if there are significant redemptions. Redemptions do seem likely, as the shares are trading at a level below the redemption price, so there is almost certainly some buyers who are buying for arbitrage purposes, with the intention of redeeming the shares for the full $10.
While I think buying with the plan of redeeming if the shares don't appreciate past the trust value prior to the vote is likely Burry's plan here, there is a more speculative potential play as well. Especially if redemptions are significant, this has the potential to end up with very low float. That, combined with the electric vehicle "hot sector" factor gives it potential as a gamma squeeze/meme stock. I mention that only for completeness, as it is much more likely that happens after the redemption deadline than before, and the downside protection is completely gone at that point. The underlying business isn't obviously worth more than the deal price, buyers who hold past the redemption deadline are in this for future potential not current value. So the risk-reward changes dramatically after the redemption deadline. For another take on the LiveWire business see this piece by Dilantha De Silva.
Other New Positions
Burry also took three other new positions in the most recent quarter: Bristol Myers Squibb, Fidelity National Financial and General Dynamics.
I suspect FNF is a play on the hot housing market, as the elevated number of transactions taking place benefits them as a title insurer. While the market believes earnings are elevated above their normal levels at present, the longer the current market conditions last, the more likely FNF shares are likely to re-rate based on current earnings.
By contrast, Bristol Myers trades at a fairly low current multiple, with the market also expecting their current earnings are not sustainable. I generally have pharmaceutical companies in my "too hard" pile, but do think anything Burry buys is worth at least looking in to.
The final new position here is General Dynamics, which replaced Lockheed Martin (LMT) in the portfolio this quarter. I have a sneaking suspicion these positions might be held as a counterbalance to a defense industry short, but it is also possible they're hedged against the world returning to war in 2022. I make geopolitical predictions never, but I can see how a hedge against either a Russian incursion into Ukraine or a Chinese incursion into Taiwan could be appealing, especially given the relatively reasonable multiples at which defense industry is trading.
Conclusion
Dr. Burry has always been interesting to follow - his ideas tend to be wide ranging, but he also runs a relatively concentrated portfolio. When someone has only six domestic longs in their portfolio it's reasonable to assume at least some level of conviction in all of them. That said, he also tends to have significant portfolio turnover (as evidenced by the fact that only 2 of the 6 positions are holdovers) so as always I recommend you do your own research on any of these names.
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