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Michael Burry Could Profit on Selloff Bets

Michael Burry was extremely busy during the first quarter of 2020, according to his firm's 13F filing for the first three months of 2020.

Burry is one of the world's best-known value investors. Immortalized in the film "The Big Short," Burry made his fortune managing Scion Asset Management in the run-up to the 2008 financial crisis. He focused on buying deep value stocks, which had a hidden secret the rest of the market was missing.

Burry's biggest coup came in 2006, when he decided to move a large chunk of his portfolio into credit default swaps. This caused some anger among his investors. They had invested in the manager for his experience in value investing, not credit investing.

The trade ultimately paid off, but the stresses of running a fund and fighting with his investors lead Burry to quit the business after the crisis. Since then, he's been managing his own money.

Scion dropped off the radar for a few years, but the fund returned to the public eye a few years ago when assets under management rose over $100 million. Any fund with more than $100 million of assets is required to report positions on the 13F form with the SEC. Considering Burry's reputation as a value investor and skill of hunting for deep value, it could be worth taking a closer look at these holdings to see if they offer value.

Scion Asset Management's report shows that Burry added five new holdings to his portfolio during the period and added to four exising positions. On top of these trades, he made a handful of sales. He made five sales in total, some of which were substantial holdings before the changes.

Scion's holdings

The most significant addition to the portfolio last quarter was Jack in the Box (JBX). Burry acquired 300,000 shares in this company. The position is worth nearly $11 million, giving it a 13.3% portfolio weight. Jack in the Box is now the most significant position in Scion's portfolio.

Shares in the restaurant company dropped to below $20 in the middle of March. Since then, the stock has recovered some ground. It's currently dealing above $64. Considering this performance, I wouldn't be surprised if we find out that Burry divested the holding in the second quarter. A profit of more than 200% in just a few weeks might be too good to pass up on.

GameStop (NYSE:GME) remains one of the most significant positions in Burry's portfolio. It was the second-largest holding at the end of March. The value investor boosted the holding by around a third to three million shares during the period, giving it a 13.3% portfolio weight.

GameStop has also seen a strong performance recently. The stock nearly doubled between the beginning of April and the beginning of May.

Other additions to the portfolio in the quarter include Facebook (NASDAQ:FB), Boeing (NYSE:BA) and Michaels Companies (NASDAQ:MIK).

When it comes to sales, Burry dumped his entire stake in Google's parent company Alphabet (NASDAQ:GOOG). This had been in his portfolio since the second quarter of 2019. He bought at an average price of around $1,080. It traded above $1,500 in the first quarter of 2020.

Another big sale was Covetrus (NASDAQ:CVET), which had a 9% portfolio weight. The global animal health technology and services company has struggled over the past 12 months and trades at a relatively high price-earnings ratio of 24.

Disclosure: The author owns no share mentioned.

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This article first appeared on GuruFocus.