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Michael Beugry, the legendary investor from the movie "The Downside," just made one of the boldest and most controversial bets of his career. He chose shares in a company that almost everyone considers doomed. He made them his biggest asset, then said he wanted to buy more while they were falling. And at the same time, he is actively playing against the super-popular artificial intelligence sector.
So the question arises: is Bugri a genius who finds bargains of the decade that others are afraid to even touch? Or is he catching falling knives that could extend his fall and wipe out his profits? So let's take a look at everything he did. Let's go. Let's start with his recent actions, because the last few weeks have been incredibly eventful for him.
Quick note: Most of this is taken directly from Bugry's posts, where he now shares his deals in near real time. The main steps and his quotes are first- hand information. In the spotlight— Lululemon, the manufacturer of yoga pants. Beugry didn't just buy a few shares. He made it his largest position, accounting for about 17% of his entire portfolio.
He himself called the company a " sly one" in his portfolio. And he said, and I quote: "This time, the cunning one is my greatest asset." Then Lululemon reported a terrible quarter and the stock fell below $100. Did Bugry panic and sell them? Absolutely not. He did exactly the opposite. He called the shares below $100 “easy prey,” a great opportunity, and said he was willing to buy more, believing they could yield 15-20% annual returns over the next 15-20 years if the company could turn things around.
That's the smart approach. He didn't pretend that bad news was good news. After reading the report, he frankly admitted, and I quote: " Obviously, the situation has changed for the worse." He even lowered his estimate of the company's real value. So, the business situation worsened, but stocks fell even more.
Remember this. This will be very important later. And Lululemon isn't his only bold purchase. He increased his stake in health insurance company Molina at $198 a share, simply saying, "I believe in Molina for the long term." He even compared it to one of Warren Buffett's best early bets and believes this year is the lowest point before a recovery.
He also secretly bought Adobe. But on the other hand, he is betting big against the AI boom, playing down shares of chip and AI companies like Micron, Oracle, Palantir, and Nvidia, with his total bets against stocks now exceeding 21% of his portfolio. He even cited one popular AI stock, Nebius, as an example of what the peak of the boom looks like.
And he is not stubborn about it. In fact, he closed his bets against Tesla and Applied Materials with a profit and replaced one bet on chips with a larger bet against the entire market, using put options worth about 6% of his portfolio. So, this is classic Berry: aggressively buying what everyone hates and betting against what everyone loves.
So what ties all of this together? Berry hunts for broken narratives, stocks whose history has become so negative that everyone has simply given up. I want to remind you that he is the same guy who bought GameStop before the GameStop mania. He was buying them at $5 a share, and it was clearly a dying business.
He buys Adobe even though the narrative is that AI will destroy it, and his entire strategy is based on one simple skill: knowing the difference between a broken stock and a broken business. A 50% drop in stocks doesn't mean anything in itself. The real question is whether the company is irreparably damaged or simply going through a difficult period that can be fixed.
If you guess correctly, then the crash becomes a golden opportunity. If you make a mistake, it will become a death trap. And here's the really beautiful part of how Berry thinks. As for Lululemon, he decided that the company was worth less after the bad news, and yet the stock became more attractive because it fell even more than the bad news justified.
Two things that sound like opposites are both true or can be true at the same time. This is the difference between price and value in a nutshell. So, let's put three of his most interesting bets to the Everything Money test. And friends, very quickly, before we get too deep, I want to remind you: never take our headlines and thumbnails literally.
We are not here to give stock advice. We are here to teach a process that you can one day apply to your own investments, helping you sleep better at night and hopefully make better decisions. Remember, our goal is to teach you to distinguish price from value. So, first, let's talk about the star of the show—Lululemon.
The stock was absolutely destroyed, falling 54% from its 52-week high of nearly $226 to $103. And the latest figures were truly terrible. Sales fell by 4%. In the domestic North American market, performance fell by 8%. And, most worryingly, sales of their famous leggings have dropped by about 20%. The company lowered its annual forecast and shares fell below $100 for the first time since 2018.
And remember, just a few months ago, Burry thought 150 was a great price. So the drop to the 90s clearly interested him. If you think his liking for the 150 price tag makes him wrong now, then you should watch to the end. Because, guys, if you buy a company at a good price, it doesn't mean it will go up immediately.
You should understand: if stocks fall, it can make the investment even more attractive. By the way, it seems the founder and CEO just announced his divorce from his wife. This will be a " fun" process. So, his fortune has already been reduced several times, and now it will be halved again . Here are the arguments in favor of growth.
Only about business. First, the brand is damaged, but not dead. People didn't suddenly stop loving Lululemon. The company simply stopped offering them interesting new products. Second, and this is important: they hired a new CEO, Heidi O'Neill, a Nike star whose expertise is exactly what Lululemon needs: fresh products and brand awareness.
She started work this week, even doing yoga with the employees in her first few days. And its main focus is the return of exciting innovative products. And third, they have $1.3 billion in cash and almost no debt. So there is plenty of time to correct the situation without panic. Guys, let me remind you: people have forgotten this part of the story, but Blockbuster is dead.
But people don't realize that the company was making strides in streaming during the great financial crisis, and it was because of debt that they were unable to make it through this transition. If it were n't for that crisis, or more importantly, if they did n't have that debt, we might be watching Blockbuster instead of Netflix as a successful business right now.
Now the arguments in favor of falling, and it's scary. First, the drop in leggings sales is a big red flag. Imagine if sales of all Nike sneakers suddenly dropped by 20%. You would question the entire brand. Second, fashionable competitors like Alo and Vuori could steal Lululemon's "coolness" forever .
And third: their problems have now spread to China , which was supposed to be the main engine of their growth. In addition, "revitalizing " clothing brands is an incredibly difficult task. When a brand starts to feel like a relic of the past, money alone isn't enough to fix it. So, is this a temporary setback or a fading brand?
Let's look at the numbers. So guys, here's Lululemon. The price is $11.4 billion. The cost of the enterprise is 13.6. The difference of $2 billion is, in fact, their debt. And you know what? Last year, they generated 1.35 billion in free cash flow. Note, their five-year average is 1.1 . That is, in the last 12 months they earned more free cash flow than on average over the last five years.
And yet stocks have fallen sharply over the past 5 years. This doesn't mean that everything will be easy from now on , but it's a good indicator. It is being sold at a price that is 8.4 times free cash flow. Same with the P/E ratio. Their profit margin has decreased. So, they are still increasing profits, even though the margin has fallen from 14% to 12.8%.
High return on capital, friends. This is a sign of quality. These guys know how to make money on the capital invested in the business, and they do it at a good, really good pace. Their 5- year return on capital is 28, almost 29%. For 1 year—20%. And , friends, even with the slowdown, their 3-year compound annual growth rate of revenue is still almost 8% per year.
Looking at it, I don't see any signs of death, but there are difficulties and sales are now starting to slow down significantly. Let's check our eight pillars. Thriller of eight pillars. Remember, this is not advice to buy , sell, or anything like that. It's just a story. And for me, the story here is that it's worth studying this company in more detail, because there's a lot that fits here.
Cash flow has increased over the past 5 years, net income has increased, revenue has increased, low debt, share buybacks, low multiples, and high return on equity. These are all things that are nice to see in the company. Remember , these are numbers for today and the past, not the future. When you buy stocks, you buy the future.
So , if you don't believe in the success of the recovery, it could still be a good buy if they buy back a lot of shares and just gradually wind down the business. Although this is unlikely. So guys, I just went over some key metrics, and I want to reassure you: if you're feeling confused, don't worry.
Every investor in history, including Warren Buffett and Charlie Munger, has felt lost at some point. I'm posting on YouTube to try to explain these things in a very simple way. Remember, I will soon tell you the price I would pay based on my assumptions. But before we get to that , I advise you to download our free PDF with key metrics.
Click on the link in the description below. You will get a description of all these key metrics, what they mean and how they are calculated. This way, you and I will speak the same language and you can continue to improve. Trust me when I say this. I can teach a 12-year- old how to invest. You are definitely better and smarter than a 12-year-old child.
You can do it. Start by clicking on the Key Performance Indicators PDF and download it immediately. It's completely free. So, let's see what the analysts think, because it's quite interesting. Analysts see earnings falling from 13 to 10.93 and then rising again to 12.79 over the next few years. So analysts assume that recovery will occur.
Interestingly, they don't see a decline in overall income. Yes, in fact, even for next year, but with growth to 13 billion over the next few years. So they are hoping for a turnaround to make the company much better in the future. The question is, will they be right? So, now our task is to combine history and numbers and use our stock analysis tool.
So guys, I'm doing a 10-year analysis . You may or may not support these assumptions I am making. I don't know if they are correct or not. I'm just assuming that Lululemon will stabilize, but won't become the big player it once was. First, for income growth, I took 3, 5, and 7% for the next 10 years.
For the rate of return, I took 10, 12, and 14%. Keep in mind, guys, in terms of profit and free cash flow, 12 is what they were actually achieving. So I'm not assuming anything higher, this is essentially the lower bound of their rate of return. Their returns over the past 5 and 10 years have been well above 14%.
So I give them a discount to this figure. Next: what P/E, what price- to-free cash flow ratio should be set for this company in 10 years? So guys, the company has a high return on capital, and that's great. But she may not be in favor. Is my bias showing here? I only put 13, 16, and 19. Am I letting today's news affect this?
Because this P/E ratio should relate to the situation in 10 years, not today. So I'm cautious because this is essentially the average market rate—15 or 16 over a long period of time. But here I see two sides of the coin. The first is a high return on capital, a quality business. Another—will the company still exist in 10 years?
And finally, my calculation of market returns without a safety margin. How much is the company worth? I entered a 9.5% return. Again , that's not a price I want to pay. This is simply to find out how much the company is worth if I wanted to sell it on the market today. I press the analyze button. That's why he's excited.
Michael Bury . The lower price is 135, the upper is 315, the middle is 210. This means that if the middle assumptions hold true , and I bought at today's price of 100, I can expect a 21% internal rate of return. This is pretty good. The question is, are my assumptions correct? This is always a question to ask when investing.
The next company is Adobe. A company I own, but let me remind you: we do not give stock advice, so do not buy a company just because I own it . But this is the company behind Photoshop. Bury started buying it at the beginning of the year, and when it fell 28%, he made his signature move. He bought even more, almost at the lows of around $200 per share, and his logic is fantastic.
Everyone is afraid that AI will destroy Adobe. But Bury's bet, in his own words, is that LLMs, no matter how perfect they are, will never replace the creative instinct of a talented person. In simple terms , he believes that AI will become a tool that professionals will use at Adobe, not a replacement for it.
And guys, I want to remind you that both ChatGPT and Claude are integrated into Adobe and have a partnership with them . Don't forget about it. But Bury's patience paid off. After buying at the drawdown, his initial bet on Adobe returned to profitability in early September. So, what is the "bullish" scenario?
Well , first of all, Adobe has a full suite of professional creative tools that pros use every day, and their own AI products are already growing rapidly. Their AI revenue has tripled to over $500 million in the last year, and that's just the beginning. So AI could actually help Adobe, not destroy it.
Arguments of the "bears" ( pessimists). New AI tools like Canva and Midjourney allow ordinary people to create professional images in seconds without learning Photoshop, and this could take away a significant portion of Adobe's customers. And a new concern arose. Adobe just announced that its long-serving CEO, who served for 18 years , is stepping down.
A new leader takes office in December, and the same top manager many had been waiting for as a successor is also leaving. Leadership confusion at the worst possible time. A positive point may be that a veteran with 18 years of experience may not have thought in the new direction of AI technologies. We don't know, but the main conclusion is that we need to keep the momentum going, and the question is, does the price match the value?
So, let's take a look at Adobe right now. And interestingly, friends, I like to use Adobe in my examples when I teach our company valuation masterclass . This is a company with a great balance sheet and revenue, and not just because of my bias, as I own their stock. So, friends, Adobe's market value is 103 billion.
The cost of the enterprise is 116 billion. This is a difference of 13 billion, essentially a debt. Friends, look at this. Their free cash flow was $10.3 billion last year. The five-year average is 8 billion. Their free cash flow has grown by 25% over the last 5 years. And now the best part. This is their free cash flow over the years.
This is their free cash flow every quarter. Friends, this is the moment when AI started to become popular. And yes, there was a downturn, but look at that free cash flow now. I'm not saying that means the company is n't dying. But, guys , this happened during the big AI surge, and look at their cash flow.
It is still growing. So I feel much calmer about it. Good. The next thing I like is the high return on capital. 27% per year over the past five years, 37 % last year, selling at a price that is 10 times free cash flow. And one more thing, friends, their free cash flow is significantly higher than their net income.
This is not a very common situation. Profit margins have been fairly stable over the past 10 years. Look at that gross margin—90%. For those of you who don't know what that means: for every additional dollar of profit, 90 cents goes into net profit before overhead and taxes are deducted. This is how you can significantly increase profits, which is why I'm surprised that their profit margins have remained fairly stable over the past 10 years.
Revenue growth: 11% per year for the last three years. Let me remind everyone: this is 11% per year at a time when the field of AI was developing rapidly. 11.9% per year over the last five years. 16.8% per year over the last 10 years. Yes, growth has slowed. This does not mean that it has stopped. I want to remind everyone of this again and again.
Let's look at our eight pillars. Another thriller about eight pillars. Does Michael Bury watch our channel? Does he only buy my " eight pillar thrillers"? Is that what is happening here? I'm just kidding. 100%. Yes, 100%. So we have eight pillars here, just like at Lululemon. This just gives us a quick overview of the situation right now.
The difference is that Adobe continues to grow. Lululemon is trying to change things for the better. But, strangely enough, they are selling at a price very close to the price- to-free cash flow ratio, which is quite interesting to me . So let's see what analysts think about Adobe. They predict that Adobe's earnings will grow from $24 per share to $ 35 over the next 4 years.
Not bad for a "dying" company and a "dying" business, increasing revenue from $26.5 billion to $37.3 billion . Again, this is just their opinion, but the growth rate is clearly slower than others. So let 's open our stock analysis tool. I will now lower my revenue growth forecast. I will choose 4, 7, and 10 percent.
Next, remember, their free cash flow is greater than their profit margin. Free cash flow is more important, so I will focus on that metric. I chose 35, 38, and 41. Keep in mind, this 38 is lower than the performance they have shown for the entire last 10 years. Lower than in the last 10 years. Just remember this.
Next, I'll be conservative on the P/E ratio, even though they have a high and increasingly better return on capital, I chose 16, 19, 22. For the record, I'll say: I think it should be higher. And finally, my expected return is 9.5%—I click the analysis button. The stock is currently worth $256. I have a low price of 360 based on cash flow, a high price of 830 , a mid price of 550 with very similar profit potential to Lululemon.
Friends, I won't lie to you. I personally think it's a better investment than Lululemon. I've studied Lulu, talked about it in other videos, and my only problem is that it's a fashion that's been at its peak for a long time. The question is, have women cooled off to this brand ? I wouldn't be surprised if in 10 or 20 years Lululemon was gone, or if it was absorbed by some big company.
It wouldn't surprise me at all. Actually, I think this is the best option. I think there are companies that should consider buying Lululemon. Maybe even Nike. And finally, the strangest bet of all—Nvidia. Because Burry is somehow betting both ways at the same time. He is playing for Nvidia to go down and at the same time owns call options on its stock .
How can this even make sense? Well, right before the Nvidia report, he bought some call options. Essentially, it was a small bet on the stock's growth. But he directly called them hedging, like insurance. Then, in less than a day, he sold half, saying they had served their purpose. He remains pessimistic in the long term, but acknowledged that in the short term there is little to stop the stock from rising further.
So, an optimistic scenario. Nvidia is a money-printing monster that has almost monopolized the AI chip market. Burry himself admitted that the company may even look very undervalued, which, by the way, is interesting for our channel, because many people write: “ Stop, Pole. Two years ago you said that Nvidia was highly overvalued.
And now you say that it may well be underestimated." The logic is that if they can continue to grow steadily as before, then they are undervalued. But that's exactly the question worth asking. Burry says the same thing. " But the pessimistic scenario is a real concern ." He said that Nvidia is currently making a monopoly profit , emphasizing the word "currently." He's not afraid that AI is fake.
And the fact that all the costs of AI may not pay off. He points to the insane amounts of money being poured into data centers and chips that can become obsolete incredibly quickly. That competition will eventually make itself felt, and that these magical profits may not last as long as the current price suggests.
This has always been our biggest concern. So let's crunch the numbers and see for ourselves, because it's very interesting to discuss how one of the most overvalued companies can be undervalued. So guys, this $ 5.4 trillion giant , Nvidia—here's the best part. The enterprise value is 5.47. That's $30 of debt, and last year they generated $127 billion in free cash flow, $52.5 billion in the last 5 years.
Return on capital. This is a level of return on capital like Apple. 73% last year, 55% per year for the last 5 years. Look at these profitability figures. 53 and a half percent over the last 10, 56% over the last 5, 64% last year. Gross profit 75%. Look at the growth in their gross profit. Guys, look at their quarterly growth.
This is the 50% mark. They grew over time, there was a downturn in 2022, and then look at this rapid rise. This happened when all this hype around AI chips started. This significantly increased their profit margin. Interestingly, they pay a small dividend, 0.12%, which takes $7 billion out of their free cash flow of $127 billion.
Very impressive results. Yes, they've made small acquisitions, 16 billion in the last 5 years, but look at that revenue growth rate. 110% per year for the last three, 69% for the last five and 49% for the last 10. You would think it would be the other way around. Instead of slowing down, it only sped up.
The question is, will this continue? Guys, our team members are actually considering Nvidia as a buy option, which is a bit strange to me . Here are our eight pillars. Everything is in order except for these valuation metrics, but you have to remember that their free cash flow and net income have grown significantly over the last 5 years, so you can't put too much weight on these numbers.
You should look at recent numbers, especially if you believe they are on a steady plateau in profits and cash flow. If you think it will only get better from here on out, I would ignore these indicators. Next, let's move on to the analysts. Well, analysts predict a growth from $470 to $20 per share over the next 5 years.
My God. Guys, this is crazy. And revenue that will grow from $215 billion to a trillion dollars over the next 5 years. I mean, this is absolutely, absolutely crazy . So guys, we're in the stock analysis tool. The most difficult thing about this company is doing a 10-year analysis. So guys, I'm going to do a 5-year analysis.
And I assume that this boom will continue . 20, 30, 40% revenue growth over the next 5 years. Guys, I won't lie to you. It's hard for me to even do this for 5 years. Can this happen? Yes. But if any obstacles arise over the next 5 years , it will drop sharply. Profitability will drop sharply. I entered 35, 45, and 55%, although they exceed these figures.
PE 18, 23 and 28 and, again, my 9.5% profit without a margin of safety. So, guys, you see me rounding up Bury's three biggest bets through the same tool— our stock analyzer. And here's the part that should worry you a little. Next Tuesday, some famous investor buys something and the headlines call him a genius.
What will you do? You will read the article, look at the graph, and then guess. That's where the gap lies. It's not about the information, you have enough of it. It's all about numbers. How much does it actually cost? How much are these stocks actually worth, based on your own assumptions, not mine or some idiot on CNBC.
Think about what this information gap has already cost you. Bury bought Adobe for almost $200. A guy in our community named Zach bought Adobe at near-bottom in February, when everyone was screaming that the software was "dead" . Guys, he's not smarter than you. He just had the numbers in front of his eyes, and you didn't.
Now look at it from another angle. One day you buy a stock for $40 that is actually worth $25 because the headline got you excited. How much is this ? 1000 dollars? Another 5,000? Most of us have done this at least once in our lives. $7 for 7 days can help solve all of these problems for you. This is the same stock analysis tool that is on your screen right now.
These are the same eight pillars. These are the same key indicators. But in this situation, you're introducing your own assumptions about Lululemon, Adobe, Nvidia. You get your own number today. Is a dollar a day worth that kind of peace and the ability to think more clearly and with less emotion? Because we all know: when we speak on emotions and make decisions on emotions, it's like going to the grocery store when you're hungry.
You will eventually run out of money. So guys, follow the first link in the description below. Do this before I show you the results. I would like you to have your own answer first. So guys, the stock is currently at 223. I'm hitting the analyze button. Remember, this is a forecast for 5 years ahead.
Here's why it can be a profitable investment. I have a low of 145, a high of 709, a mid of 340. So I understand the logic of why this is a good investment if you believe that AI will continue to evolve for a long time. After we recorded this video, Michael Burry himself stated that he had reduced the risks in September.
He reduced all his positions and gave up his December 2026 Nvidia and Palantir put options without rolling them over. He has plenty of cash now and says he's willing to just watch because he thinks the fall will be an interesting time in the market. But keep in mind, I remember many times in the past he predicted a market peak and it didn't happen.
So take it as you will. But in the end, I still think he's a very good stock picker. With Burry making huge bets both for and against AI, you should definitely check out our latest in-depth analysis of the AI boom. This is a perfect addition to this video. So watch it next by clicking right here on the screen. Thank you for your time.
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