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7 Stocks Michael Burry ('The Big Short') Loves

Wayne Duggan

The largest holdings in Michael Burry's portfolio.

Michael Burry became famous in 2015 when the hit movie "The Big Short" portrayed the drum-playing, socially awkward hedge fund manager as he foresaw the 2008 mortgage crisis that portended the Great Recession. Using esoteric financial instruments, Burry bet on this inevitability and made a fortune when it came true. He later closed his fund and reopened a smaller one, Scion Asset Management, in 2013. Having recently met certain filing requirements, Scion began revealing its equity positions in early 2019 for the first time since 2016. Of 14 total stocks, here are the top seven stocks in the Michael Burry portfolio.

Western Digital Corp. (ticker: WDC)

Western Digital produces hard disk drives and solid state drives for use in server and computer storage. Western Digital has an appealing valuation at just 9.3 times forward earnings, but its revenue dropped 28% last quarter. Burry sees value in the stock and may believe magnetic-assisted recording and other HDD technology advancements will help HDDs maintain certain cost advantages over SSDs. The Internet of Things could also be a secular growth tide that could lift all storage stocks, including Western Digital. Scion holds 250,000 shares of WDC stock worth about $11.9 million.

Cleveland-Cliffs (CLF)

After a steep fall in August, shares of this domestic iron ore miner are underperforming the market year-to-date, up only 8% as steel and iron ore prices have plummeted due to the potential for a global economic slowdown. Despite the share price weakness, Cleveland-Cliffs just announced a 20% dividend hike and a one-time special dividend of 4 cents per share. Cleveland-Cliffs shares now trade at a miniscule 5.2 forward earnings multiple. Scion holds 1.1 million shares of CLF stock worth about $11.7 million.

Tailored Brands (TLRD)

Tailored Brands is a seller and renter of of men's suits and tuxedos and is the parent company of Men's Wearhouse and Joseph A. Bank. Burry must see the stock's steep 73.3% sell-off in the past year as a buying opportunity. While Tailored Brands is still facing headwinds from a long term shift in workplace dress toward more casual attire, shares spiked in August on reports of private equity interest. A buyout makes sense given the stock's forward earnings multiple of just 3.3. Scion holds 1.85 million shares of TLRD stock worth about $10.6 million.

FedEx Corp. (FDX)

FedEx falls into the same Scion basket of stocks that have been troubled in the recent past but now offer potential value as long term recovery candidates. FedEx shares are down 32.5% in the past year on fears that Amazon.com (AMZN) is transitioning from partner to competitor. FedEx recently dropped two partnership contracts with Amazon, but bulls see new onsite locations at Walmart (WMT) and Walgreens Boots Alliance (WBA) stores as signs FedEx is preparing itself for life after Amazon. Scion holds 60,000 shares of FDX stock worth about $9.85 million.

Alphabet (GOOGL, GOOG)

Google parent company Alphabet is Burry's largest tech holding. Despite concerns over regulatory crackdowns and potential antitrust actions, Google continues to wow the market with its online advertising numbers. Alphabet reported 19% revenue growth last quarter. As growth in core search slows, high growth businesses such as YouTube, Waymo and Google Cloud are positioned to pick up the slack. Given its dominant search market share and impressive growth outlook, Alphabet shares are also reasonably valued at just 21.6 times forward earnings. Scion holds 9,000 shares of GOOG stock worth about $9.7 million.

Cardinal Health (CAH)

Cardinal Health is yet another stock that has struggled recently, dropping 42% in the past three years. Cardinal is one of the largest drug and medical product distributors in the world. Unfortunately, drug pricing pressures and legal blowback from the opioid crisis have pressured pharma stocks. Despite reporting earnings and revenue growth last quarter, Cardinal shares trade at just 8.7 times forward earnings. In addition, the stock's dividend yield is 4.1%, which means investors get paid to wait on a turnaround. Scion holds 200,000 shares of CAH stock worth about $9.4 million.

Alibaba Group Holding (BABA)

Chinese e-commerce giant Alibaba has gotten caught in the crosshairs of the U.S. trade war with China. Yet despite the negative trade war headlines, Alibaba's mostly domestic business seems to be fairing just fine. Alibaba reported 42% revenue growth in the second quarter, dwarfing the growth rate of American counterparts Amazon (20%) and eBay (EBAY, 2%). Like Alphabet, Alibaba investors don't have to break the bank given the stock trades at just 20.5 times forward earnings. Scion holds 50,000 shares of BABA stock worth about $8.4 million.

The largest stock holdings of Michael Burry's Scion Asset Management:

-- Western Digital Corp. (WDC)

-- Cleveland Cliffs, Inc. (CLF)

-- Tailored Brands (TLRD)

-- FedEx Corp. (FDX)

-- Alphabet Inc. (GOOGL)

-- Cardinal Health (CAH)

-- Alibaba Group Holding (BABA)



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