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Well, in honor of the great feat carried out by Michael Barry, that big short bet against the real estate market during the Prime Crisis of 2008, today we would talk about the same thing, the big bet, but in a completely different environment and a big bet aimed at a possible, or rather , mega rally in the stock markets.
At least that's how Michael Barry would see it at the moment, and in fact, he's completely reversing his previous speech. The previous discourse predicted a further decline in the market and specifically bet against the semiconductor sector, a sector which, as we are seeing, was actually carried out through put options in the Banex semiconductor ETF.
We are seeing that the trend in semiconductors has not changed. In other words, the economy has not entered a recession and semiconductors, despite some occasional corrections, have continued to rise. Therefore, Michael Barry has had to unwind positions, accepting losses, and now, as we said, completely changing his approach and betting on other companies that could be very revealing in the current environment, taking into account the context in which we find ourselves and the expectations of the future market.
To begin, and before going a little deeper into what kind of bets he has recently made or what kind of purchases he has made and what perspective Michael Barrielmente would have in this case , it is worth remembering the style of investor or speculator that Michael Barry would be in this case. A very different style, very different from, for example, Warren Buffett.
In fact, we have prepared this table so that we can understand a little that it is not the same thing. When we talk about the Buffett effect it's one thing, when we talk about the Barry effect it's another. This table, in fact, summarizes quite well, I think, the difference between "amamos" and "investors," especially to understand that the purchases we are seeing carried out in the latest report, in this case by SON Capital, are probably counterintuitive.
What am I referring to? Then we'll be talking about several companies, but if you look at many of them, in fact, they are falling and falling quite a bit. Let's look at this rate, for example. We'll talk about all this in more detail later , but let's look at what kind of companies. Companies that are at their lowest points.
Why is Michael Barry investing in this? And I repeat, with a completely different style from Buffett's in terms of investment style, approach, narrative, etc., etc. We could even say that Barry is more of a speculative gambler who plans well in advance, that is, he seeks to anticipate market movements, while Buffett seeks precisely another type of value in the market.
But this is simply to provide context, and as we said before, let's remember that Warren Buffett once bet on a recession and runaway inflation. Look at the graphs we have on the screen. For now, the latest GDP data, in this case from the United States, is very good. There is no negative variation like the one we were able to see in that technical recession.
2022, two consecutive quarters in negative territory. Now we have not seen that, but quite the opposite, a trend in this case of GDP that remains positive above the zero level, the zero line, basically. And inflation, as we all know, is continuing in line with the Federal Reserve's target and is now very close to it.
It's also worth recalling Jeroen Powell's recent statements regarding the Federal Reserve's current outlook or narrative. Powell's exact words recently in Jackson Hall were, "The time has come to adjust monetary policy. The direction to take is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks." And then Powell was much more specific because he said, "There are good reasons to think that the economy will return to 2% inflation while maintaining a strong labor market." Of course, all of this obviously differs from the latest short bets that Michael Barry had in this case.
And now we're going to see what the shift is, where it's cutting back, where it's selling. He has carried out many sales, mind you, 100%. It is not, let's say, a reduction like the case of JD, but a direct sale, a total and absolute liquidation of some companies that he had previously bought, which now seem not to be fitting very well with the strategy that Barry has in mind in view of the current scenario.
Let's look at some examples of companies that Michael Barry had acquired in the past. And let's look, for example, at this company, Sport Physical Gold Trust. If we realize this, that it is a company, obviously a trader of physical gold, here we realize that the bet, in this case, to buy on this physical gold company made a lot of sense, precisely in line with the expectations that a recession would come , that there would be uncontrolled inflation, etc., etc., etc.
Be aware that the company has generally performed well, but it seems Barry has already liquidated it. So, when a company's stock price rises, as Sport Physical Gold Trust has been doing recently, what's behind it all? In other words, why is he selling and liquidating 100% of the long positions he held in this company?
And in fact, it carries out other types of purchases of other types of companies that have nothing to do with the other types of companies it had previously bought, and the narrative has also, as we have said, changed quite a bit. Narrative by Michael Barry. Obviously we're going to pay attention to one of the companies, we could highlight, for example, Shift for Payments, which is striking that it has made this purchase.
And again I refer to what we were talking about before. Let's again refer to this table to understand some of the changes it makes to the portfolio, which can sometimes be a bit counterintuitive. OK? Let's take a look at this company. It is a company that basically markets payment services, etc., etc., and is basically very closely linked to the growth of what would be retail consumption, basically.
In other words, we have already been seeing, in fact, how retail sales have remained very strong in the United States. Let's look at the latest data, 1% against estimates, if I remember correctly, from 0203, that is, quite robust, quite solid growth of what would be domestic consumption, retail consumption, basically.
So, when we see this type of company, it's a company, as I was saying earlier, that facilitates everything related to payment systems, POS terminals, card readers, basically, etc., etc. But of course, there are other companies like Visa, Mastercard, a bit bigger, sector leaders, more diversified in terms of business lines, which could be a bit safer bets, right?
We say it in quotes, obviously, but for example when we go to this type of company, in fact this reminds me of so many others that we could also analyze, this one is very similar, this is exactly the same as the same model of in this case Shift for payments and we realize, it would be a competitor, but with a, let's say, with a performance, a behavior very different from the company in which Michael Barry has recently invested .
So, what's behind all this? To understand this, we need to understand a little about the other purchases he has also made, to put them all in context and better understand the landscape or the mental framework that Michael Barry would use in this case. For example, RIDS, in this case Hoodson Hoodson Pacific Properties.
When we pay attention to this company and look at it from a technical level—in fact, I think we were just showing this chart of the company—we will see that not only has it fallen a lot, but right now Barry is betting on companies that have fallen a lot, that are at their lowest points, and if that weren't enough, when we look a little at the financial side of the company, it's not profitable.
Let's take a look at the progress of what they are in this case, for example, the revenues, the progress that the EBIT has, that is, these are companies that are losing money, they are companies that are not being profitable, but they have something, something that is basically what would be the net debt.
When we pay attention to these types of companies, for example, we could go and look for some more specific data on debt, such as basically some debt ratios that we could find on Finbit. When we look at this and analyze these types of companies, we see that they have quite high debt ratios. Then all of that starts to fit the picture a bit more , regardless of the drops we 're seeing here.
What do we mean? It appears that Michael Barry might be prioritizing strong domestic consumption. That's why it has also chosen, far from being a leading company in the sector, but has chosen this type of company like Sheford Payments, and in addition, it is also betting very heavily on real estate companies, managers of basically real estate.
In this case, Hudson Pacific Properties rents offices and properties; in fact, it has large clients like Netflix and various companies in general. But we already know about the crisis that the United States has been going through recently in many areas or sectors of offices, real estate in general, and commercial properties, okay?
Let's remember the huge losses that many asset managers are experiencing precisely because of this. We already know that since 2020 there has been a very strong increase in teleworking. Office demand has dropped considerably, and we might say, "Okay, if a major rally and economic growth are anticipated, based on Barry's big bet in this case, stemming from a macroeconomic environment that appears to be under control, with an upcoming interest rate cut, all of this should translate into these types of companies rising due to their core business.
Or will they rise because they have a high level of debt, which will allow them to refinance at better interest rates, balance their debt, and from there obtain, let's say, better multiples in the future precisely because of this? Well, I think some of the signals that Michael Barry is looking at might lie there, stemming precisely from the context we'll be entering this year.
Therefore, to summarize, we could conclude that these types of bets Michael Barry is currently making on certain companies could be in line with an expectation of a stock market rally, an improvement in various financial conditions for many companies that have a lot of debt." Debt, and also, to put a foothold, let's remember that a lot of capital has recently been flowing into what are precisely the "ride" stocks, which are basically the type of companies we were just talking about .
So, the bet that Michael Barry might be making seems logical at first glance, but let's remember what we were saying in the table we were showing not long ago in the comparison with Warren Buffett: not only does he sometimes have a contrary philosophy, right? But sometimes what he seeks is precisely a very contrary stance with respect to the market.
In fact, just as we discussed here, right? He's not afraid to act against the grain, even when it's very unpopular. Of course, in this case it could be something different; Michael Barry's big bet in this case could make sense , but let's remember that he tends to try to anticipate events much earlier , not to mention that great success Michael Barry had in the 2008 crash, let's remember the drawdown that Son reached.
Capital was in the very high double digits . This means that before the market vindicated him, the fund bled a lot, okay? In other words, timing isn't always Michael Barry's strong suit. And let's also acknowledge that there have been numerous bets that went wrong. Remember that big fight—a "fight" in quotes—between Michael Barry and Katy Wood regarding Tesla?
One was very short-swing; in this case, Michael Barry was very bearish against Tesla, betting heavily against a drop. In this case, Katy Wood was very bullish, very bullish, and betting heavily on Tesla. This obviously raises several challenges regarding how these new purchases, these new bets by Michael Barry, will play out, and how the market will react to them in relation to the prevailing market narrative.
Another interesting point would be to consider the new purchases—not new purchases, but rather, new purchases—but in addition to, once again, Chinese companies that don't carry nearly as much weight as they should. Here. What we're looking at here is the aggregate percentage it has added to the portfolio.
If we also talk about one of Michael Barry's long-standing major bets, it continues to be China. When we look at holdings and see which companies have the largest weight in the portfolio, in this case Michael Barry's, we'll realize that Alibaba, Baidu, and jid.com together account for more than 45% of Michael Barry's total portfolio .
If we pay a little attention to how these companies have been performing, we'll realize that they're not only at their lowest points, but also that since the Chinese state's intervention— incorporating members of the Communist Party into the boards of directors of these large companies and forcing them to contribute this "solidarity" or, again, extracting profits from these types of companies for the social good, as the Chinese Communist Party claimed—these are clearly factors or catalysts that scare away investors.
This is precisely what comes next. Hence not only the significant drop in multiples, but also the stagnation, not only in technical terms, but again, in terms of multiples, that these types of companies are experiencing . Even so, Michael Barry seems to be maintaining them as a very strong bet due to these signs of growth in the Chinese economy, signs of the measures the Chinese government is trying to implement to precisely revive and boost domestic demand so that, let's say, China returns to growth and improves its overall situation.
These are bets that are, evidently, a bit trickier, a bit more complex to analyze, but he's basically holding them. However, let's focus on the latest changes, as we mentioned earlier, and these large purchases he's making may be, let's say, very much in line with the sector's strength. In fact, when we look, for example, at Finbit and go to the Groups section, we see that on a weekly basis, the financial sector has been growing significantly, and on a monthly basis, it's also leading the growth, even surpassing the previous month's figures.
Healthcare. But if we go back even three months, we'll see the combination. Here, real estate, along with financials, is leading sector growth over the last few months. This suggests that we might be understanding a bit more about Barry's bets in favor of a new market context that specifically favors the growth of these types of sectors.
So, what can we learn from all this? Well, that Michael Barrick isn't someone who particularly follows trends; he likes to anticipate market movements, which can obviously be very lucrative when he's right, but also carries enormous risk when he's wrong, and he obviously has to close positions with significant losses.
Therefore, as we've seen, Barry can withstand a large drawdown in the fund before, let's say, these types of bets prove correct or materialize in the market. And ultimately, what this tells us as retail investors is to remain calm and cautious, not because of the Barry effect, since Shift for Payments also experienced very strong gains since then.
Barry's entry into the company, in this case by buying shares, has been revealed, but we must remain cautious nonetheless. He's not the best in terms of timing and sometimes makes significant errors in his moves. Ultimately, this tells us that it will always be important to do our own research, just like with the other Pfizer company—not the pharmaceutical one, but the one that makes payment point systems and payment facilities, which we were talking about earlier—a competitor that even performs better than Shi for Payments.
In other words, we should always consider our context and our own research first, and not get carried away by the enthusiasm of the moment. So, what do you think? Do you believe Michael Barry is right this time? Is he on the right track, or is he perhaps taking too many risks? Do you think we might be in for the big rally he 's anticipating with these kinds of moves?
Or do you think there might be more risks ahead that are n't immediately apparent? Let us know in the comments, and as always, thank you very much, and see you next time. in the next video.
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