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So, Michael Burry is undoubtedly one of the greatest investors of our generation. We would be wise to listen to him when he speaks, as he has successfully predicted such bizarre outcomes as the mortgage crash, high leverage in crypto, and out-of-control inflation in the past few years. But now Barry is back and saying we are heading towards a consumer recession , in his words, "a very cold and dark place ." In addition, Michael Burry took a huge short position on one of the biggest companies on Wall Street .
According to Michael Burry's latest filing, filed on March 31, he holds a huge bearish put option of 206,000 shares on Apple . Yes, this is a very crazy decision. Moreover, as far as we know, this is the largest position in his portfolio. This crazy person believes that the market will continue to fall .
He thinks even a giant like Apple will fall far behind . But what kind of stocks does a visionary like Barry buy when Apple is also expected to fall? As the stock market plummets, which stocks does Michael Burry think will thrive in the cold and dark place ? More simply put, what are the recession-proof stocks for Michael Burry?
The good news is that, under the terms and conditions, Michael Burry is required to disclose what he is purchasing each quarter . So when he thinks the market is going to crash , we can see exactly what he's bullish on. But before we get into that, do me a little favor. Please don't forget to hit that Like button.
This helps me a lot with the YouTube algorithm . By doing so, I will show my gratitude by telling you one of the best jokes later in the video . Trust me , don't miss it at all. So, Michael Burry is known as Wall Street's Parma Bear, the savior of 2008, and the Tommy Lee of the stock market. To be honest , I created those nicknames entirely on my own .
But maybe one of them will settle down . But Burry himself is, by definition, a Parma bear . He has been expecting a stock market crash for the past few years, as stock prices have been rising out of control . And we are in a bigger hype environment than we experienced during the dotcom bubble. And Michael Burry even put his neck at risk with this mega giant short position on Apple .
To be clear, yes, he took a short position using 206,000 puts , which means he will make a lot of money if Apple falls . If Apple goes up, he has very little to lose, which is a very bold bet for any investor. You should not hold more than 17% of any one thing in your portfolio . But apart from that big short in Michael Burry's portfolio , he is also buying some shares .
These are companies that he believes can survive and generate good profits even when the market falls. So, let 's find out why he's buying those shares, because I saw an important similarity in many of them . Now, if we look at his investments, apart from his big short on Apple, a few things surprise us.
That is, he took a large long position in Google and Meta (formerly Facebook), all of which belong to the same sector . So why short a big company and take a long position in a small one ? This doesn't make sense unless you notice that these companies differ in terms of one key statistic. Barry has always said that the tech sector and stocks in general are overvalued and overpriced.
Moreover, he believes that the biggest market crash is coming. So why is he taking long positions in Meta and Google in a tech sector where prices are so high ? We can only compare Google and Apple, because Meta is completely changing its business model . You will notice that there are many similarities in their proportions.
For example, if we look at the price to sales ratio, Google has 5.7, Apple has 5.9. Both are almost identical. Google's PE ratio is 20, Apple's is 22, and the price to free cash flow equity is both 22. These are the most popular valuation metrics commonly used by good investors. So according to these simple metrics , it seems that there is not much difference between them.
Unless there is another important statistic, it is not viable to short one and long the other. I think I found that statistic , which is price to book value. Price to book value is one of the most boring metrics. It does not take into account future revenue growth or relate to how well the company will grow .
It simply compares its book value, i.e., assets minus liabilities, to its price . In other words , investors use price-to-book value to assess whether a stock is priced correctly . If you still don't understand what price-to- book value is , the easiest way is to ask yourself, if you were to close down the company today and sell everything, what would it be worth compared to the current business price ?
Generally, a high price-to-book value means that the company is overvalued , while a low price-to-book value means that the company is undervalued. However, you should compare the price-to- book value to other companies in the same sector , because, for example, the ratio is much higher in the tech sector than in the utility sector .
But if we look at the tech sector and look at similar companies like Meta, Google, and Apple, fortunately they are all in Burry's portfolio , he is short one and long the other two . Apple's price-to-book value is very high at 34.1 , but Google's price- to-book value is not 34. It was n't in the 30s, it wasn't in the 20s , and it was n't even in the 10s.
Its price-to-book value is only 6.1 . And Meta, better known as Facebook, is only at 3.7. What these two companies are showing is that if you were to close down the business and sell everything, their price-to- book value would be better than Apple's . And certainly, none of these companies are going to close their business.
This means that during an economic downturn, when calculating the value of a business , these metrics become very crucial if the situation changes drastically . I think Michael Burry is using one of these metrics in his own way to evaluate a business . What is a good deal and what is a bad deal ? Even though Apple shares have already fallen sharply this year , a price-to- book value of 34 is still very high .
I think Michael Burry is buying companies like Meta and Facebook rather than Apple because he thinks they are already close to a good buying opportunity . I don't think he's buying these because of income or the company's future projects . He believes that these companies are undervalued, as he predicts that the overall market will fall and that they are already close to their resale value .
Apple is one of the most highly held companies in portfolios. So, when people want to make profits , it puts a lot of pressure on Apple . So, why not keep your expectations in check and bet to profit if the market falls ? That way, if the market falls, he wins on Apple, which means he makes a profit.
If the market does indeed rebound, fortunately , his loss will be limited because he has a put option on Apple . At the same time, his Meta and Google shares will boost his portfolio. He can't lose that much. So, in a way, he's trying to win both ways . No matter which direction the market goes. In one case, he could win twice when the market falls, he could cover his short position and use those funds to buy back Facebook and Google at a much lower price.
Given his speculative tweets about a market bubble, that we're headed for a Great Recession, that inflation is rampant, and that the world could end any day, no one would have thought Michael Burry would buy tech stocks . I don't think anyone expected this to happen in his final filings . But in these filings, I showed that he wasn't just buying tech stocks or shorting Apple.
He is also buying other companies . And guess what? My price-to-book value theory works in all but one of the investments he made. Bristol- Myers Squibb, whose name I can never pronounce correctly, is currently at a price-to-book value of 5.3. Discovery Warner Bros.'s price-to-book value is 1.1. Sign Corp is 1.8.
The OVV is 2.5. It will come later with 2.3. Stellantis . And whenever I see this ticker , I always get confused with Tesla, STLA, TLSA. It's very confusing . But STLA currently pays you an 8% dividend and has a price- to-book value of 0.8 . Very little. And then there's Global Payments , ticker symbol GPN, which has a price-to-book value of 1.3.
Sportsman's Warehouse is located at 1.5. In fact, Booking.com is the only company with exceptional price-to-book value. And I don't understand why . I really do n't understand this. If anyone has a theory as to why he bought it , perhaps he was hoping that the world would fully reopen, travel would increase, and Booking.com would right itself .
Maybe that's the reason. This is a more speculative investment. I do n't really understand it because I do n't like it. Let's say so. But given everything else he owns, it's clear that he looks at price-to-book value as one of the main metrics when balancing his portfolio . In the third quarter of last year , we saw him sell everything he owned, and now he's started buying back companies that he felt were undervalued .
The big question now for Michael Burry is, what is he going to buy next ? His next filings are due in the next two weeks , and we'll know if he's bought more companies or added more puts on Apple. It will be very interesting to see if my 'price to book ratio' theory proves true , because I truly believe it will continue to hold .
These are the stocks that Michael Burry thinks will perform well during a recession . But I promised to tell you a 'dad joke' , and I'll tell you what it is after this important news . This is the first time you are hearing this here. If you want to use eToro in the US now , stock trading is available in 46 states, with more to come soon .
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So, if you're interested, take a look . Now, it's time for the 'dad joke' you've been waiting for. What happens if a frog's car doesn't start? That said, it definitely needs a 'jump'. What? No. Not good. Okay then . If it still doesn't start, it needs to be towed. Oh my. Sorry. I'm sorry. I really like these jokes .
I used to say this a lot at my old job , and if you don't know , I used to work in a shoe recycling factory , and I quit that job because it was exhausting . That's all. Honestly , I hope you like it . Let us know in the comments below which stocks you think Michael Burry will buy next . Code word ' Michael'.
If you want to see how Warren Buffett picks his stocks, watch the video above about the three important criteria he uses when buying any business. Be careful. May everything go well for you . Peace.
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