원문 보기
Michael Beugry, the legendary investor who predicted the 2008 housing market crash and invested in GameStop before it became a meme stock, just reduced his holdings from $102 million to $53 million in the third quarter of 2024 , according to Bloomberg data. In its latest 13F report, Bugri revealed that it is divesting some of its largest assets.
One of the biggest sales was his stake in bank stocks, which he reduced by 90% . While Bugri has made several new investments, one thing is clear for sure: the third quarter of 2024 marks a major turning point in Bugri's investment strategy and demonstrates a major shift in his views on the U.S. economy.
When we look at the biggest cuts made by Michael Bugri in the third quarter, we see that five of them are US stocks. Together, they made up 37 % of his portfolio, and he sold them for about $38 million . So, has Dr. Beugry suddenly become pessimistic about the US stock market? Well, there is increasing talk of a potential recession in the United States, and many economists are suggesting that it is becoming quite real.
Unfortunately, the 13F reports do not indicate the reasons why a particular transaction was made , and Michael Beugry himself did not directly mention that recession risks were a factor in his decisions. But we can clearly understand his logic by looking at the sectors of the economy he cut most aggressively.
Here's what his portfolio looked like at the end of the first quarter of 2024 , before the big changes. It had a significant share in consumer staples . These are stocks of companies that sell non- essential goods and services, the financial sector, banking stocks, energy, and industrial stocks. All of these sectors of the economy are very sensitive to business cycles.
Consumer sector companies need a strong consumer base. If the economy is weakening, people usually don't buy non-essential goods. Bank stocks are sensitive to financial stress. If the economy is weakening, it usually means more people and businesses are defaulting on loans, which is not good for the banking sector .
Energy and industrial stocks also need a strong economic environment because these companies thrive when many goods are produced and transported. So, given his high exposure to these sectors in the first quarter, it's safe to say that Michael Bugri was quite optimistic about the US economic outlook.
Now , in the second quarter of 2024, we see that it has reduced its share in consumer staples by about 30%, in financials by 90%, and has completely exited the energy and industrial sectors. Instead, he began building a position in consumer staples stocks , which are known as the defensive sector and are less sensitive to business cycles.
He maintained a significant stake in shares of communications and technology companies, which are also less sensitive to economic cycles. So, we see a clear shift away from sectors that depend on the economy towards those that are less vulnerable. We also see that his total stock volume in the first quarter was about $102 million.
As of the second quarter, this figure is $53 million . Again, Berry himself did not speak specifically about this reduction in asset allocation in his portfolio. But usually selling half of your portfolio doesn't mean you're becoming overly optimistic about the markets. However, it is important to note that Michael Berry is not opening "short" positions in the market today, as he did before the 2008 financial crisis .
Overall, his portfolio today remains oriented towards " long" positions, meaning he is still betting on stock growth. And most of this "long " exposure falls on China. Michael Berry recently sold off Chinese tech stocks, and as of Q3 2024, three of his largest holdings are Chinese tech companies, together accounting for a whopping 46% of his portfolio.
He increased his stake in Alibaba Group by 24%, adding 30,000 shares. And he also increased his stake in Baidu by 87.5%. Baidu is a major player in the artificial intelligence and internet services market in China. One reason he does this is that Chinese stocks are significantly cheaper than American stocks.
This chart shows that Chinese stocks are at their lowest price relative to US stocks in over 15 years. Many are worried about China's economy due to government crackdowns, global tensions, and slowing growth. But perhaps much of this pessimism is already factored into the lower valuations of Chinese stocks.
Michael Berry apparently sees these low prices as a great buying opportunity and probably believes this pessimism is exaggerated. Indeed, if China's economy improves or stabilizes, valuations could return to more reasonable levels, which could cause these stocks to skyrocket. Making bets that few other investors agree with is a core part of Michael Berry's investment strategy.
This is what is called contrarian investing. It is well known that in the run-up to the 2008 financial crisis, his short bet on the housing market was not considered a very wise investment. The risk of this strategy is that these cheap stocks stay cheap or, worse yet, get even cheaper. This is what is called " cost traps".
Companies that are cheap due to very weak growth and remain so because their development never accelerates. Companies like Alibaba and Baidu are leaders in e-commerce , cloud computing, and artificial intelligence. Industries with great growth potential. The real problem with these stocks lies in China's economy, which is currently experiencing a crisis in the real estate market.
If we take into account the experience of the United States, China can expect a fairly strong recovery, as was the case with American stocks after the 2008 crisis. But if China follows Japan's path, it could be decades before it sees a sustained recovery. Now Michael Burry has made one very unexpected move in his portfolio.
He sold his share of the gold. Until last quarter, about 7% of its portfolio was invested in Sprott Physical Gold Trust, which provides direct exposure to the price of gold. Gold is considered a safe asset because it maintains or even increases in value during times of market volatility and economic instability.
The exit from gold suggests that Burry may not be as worried about an immediate economic collapse or a serious market downturn. So what's the big picture? Michael Burry has sold a significant portion of his holdings and is shifting capital from expensive US stocks to undervalued sectors, especially in China.
Sectors that he believes are undervalued and offer better returns in current conditions. He is not playing bearish like he did in 2008, and he has also sold his gold position, which does not necessarily indicate an expectation of a major crisis. Overall, we can conclude that Michael Burry has become cautious, but not overtly pessimistic.
Comments 0