Michael Burry BUYS Alibaba Stock

So as of the time of recording, we've just ticked over that 45-day period after the end of each quarter, which means the 13F filings are out. So in this video, let's have a look at exactly what Michael Murray is up to with his portfolio and particularly what stocks he was buying leading into 2023.

I'm not going to keep you guys waiting; here is the list of all the changes to Michael Murray's portfolio in Q4 of 2022. As you can see, the private prison company Geo Group, which was 37% of his portfolio last quarter, has now been trimmed to 25%. He also completely sold out of CoreCivic, the other private prison company that he bought in Q3, and he also reduced 70% of his Curate retail position, which was his number two stock in the last quarter.

But with that said, have a look at what comes in the door: a 150,000-share position in Black Knight, a 150,000-share position in Coherent, a 50,000-share position in Alibaba, a 75,000-share position in JD. Then he also bought into Wolverine Worldwide and MGM Resorts and SkyWest.

So let's discuss, and I know it's not even the biggest new buy in his portfolio, but I think we have to zoom in on Alibaba and JD.com. Michael Burry is buying Chinese tech, and it’s actually not the first time he’s done that. Back in Q1 of 2019, he bought JD.com, and in Q2 of 2019, he bought Alibaba. So he actually isn't a stranger to these businesses.

If I had to have a guess, I think it would have been this drop that prompted him back into JD, with the shares diving to 37% in Q4, and it was probably the same thing around about here with Alibaba, with the shares down to around 64% in Q4. So I think this is very much a case of just getting a very attractive price in the short term and taking advantage of it.

It’s fair to say I think Burry has probably absolutely nailed the timing on these stocks because if you have a look, both of them have had very solid bull runs since. But what's the biggest takeaway for me specifically from these two portfolio changes? Well, honestly, I think it's quite simply that Michael Burry feels comfortable with buying Chinese tech, joining the long list of super investors that have come to the same conclusion.

Despite all of the media's reports, you know, there have been fears of potential de-listings last year, concerns about dodgy accounting, and also more generally, there were concerns surrounding the tensions between the U.S. and China. Now, we do know that a lot of that news is fairly behind us now, especially with the PCAOB being able to check over the audit data from these Chinese companies—that was a very big step.

But there is still a lot of concern with these Chinese stocks simply due to the economic landscape over in China. You know, in 2022, economic growth slowed from 8.4% to just 3%, largely on the back of their strict COVID policies. But as this research report notes, weaker global demand and rising geopolitical uncertainty is still a cause for concern.

But of course, what’s been really interesting, as I said, is watching the raft of super investors such as Charlie Munger, Monash Pabrai, Ray Dalio, Bill Miller, and so on actually step up to the plate and invest in Chinese tech during this time period. And now we can add Michael Burry to that list.

Although, I think one thing to note with these Chinese businesses is that you really do need to have a very long-term investing outlook to consider these businesses. If we turn to Simply Wall Street, you can see that just based on their current performance and their current estimates, their discounted cash flow model shows Alibaba actually sitting around fair value. Tencent also comes up around fair value, although interestingly, they do note that JD.com looks significantly undervalued at the current time.

But of course, with that said, that doesn’t just mean you go out and buy it. This is purely an exercise in idea generation, and those tools just give you a hint at businesses you may want to go in and research yourself.

I also did want to take this opportunity to thank Simply Wall Street for sponsoring this video. If you’re interested in looking through my curated list of all of Michael Murray’s buys for this 13F, please do check out the Discover collection I've linked down in the description of this video. You can literally just pick any stock you like from there, and then you can check everything from valuation and future growth expectations to past performance, financial health, ownership stats, and a whole lot more.

Plus, if you did want to sign up for the premium plan that I’m using for my research through that referral link, you’ll be able to get a 14-day free trial and you’ll also get 40% off their plans. So thank you very much to Simply Wall Street for that one.

But now, moving on to the two bigger buys from Burry in Q4, coming in at 11.31% of the portfolio, we have Coherent Corp. So, Coherent is a six billion-dollar company listed on the NASDAQ. They actually changed their name last year from 2-6 Incorporated to Coherent after making the acquisition of Coherent. Their business is centered around three types of products: semiconductors, networking equipment, and lasers.

Now, I don’t pretend to know their industry or their business very well, but interestingly, the stock was down about 60% from its peak in 2021 after they announced that they wanted to buy Coherent. That deal was finally complete in the middle of last year. But what's funny is that somehow, yet again, Michael Burry seems to have timed the market to perfection.

Now, of course, I don’t endorse market timing, but somehow Burry has just nailed it. In fact, he’s probably sitting on about a 40% gain if he still holds the shares today because the shares have just been on an absolute tear since late last year. But what's interesting, though, is if we turn over to Simply Wall Street and look at their discounted cash flow, it seems to suggest that this business is actually quite overvalued for where they’re at right now.

So this play by Burry could simply be a short-term trade, or he might be buying with a longer-term thesis around the future of semiconductor manufacturing and laser technology. Time will tell.

Then lastly, his third big notable buy was in Black Knight Inc., which now slots into the second spot in his portfolio, occupying about 20%. Black Knight is a company that provides software that allows banks and mortgage lenders to streamline the home loan process. Their software helps to manage and process home loans, helps to handle customer documents and information, and also makes sure that everything is secure and compliant with the regulations along that process.

Now that’s interesting and all, but the thing to know about Black Knight is that a lot of investors aren’t currently buying it for the business. This is because Intercontinental Exchange is currently looking to acquire Black Knight. They’re committed to buying Black Knight at 13.1 billion dollars, but currently, the market cap sits at 9.92 billion. So that’s a potential 32% upside if the deal does go through.

But currently, the deal is being held up by regulators who have expressed concerns over antitrust. So we can look at the business on Simply Wall Street right now and, you know, do some analysis. But at the end of the day, Barry’s bet on this company would definitely be around this acquisition going through. So clearly he thinks it will. I think the resolution is expected in the next few months, so we’ll just have to wait and see whether this one turns into another good pick by Michael Burry.

So overall, that is Burry's big buys heading into 2023. However, with that said, there are definitely a few things to be aware of with Michael Murray's 13F filings. The first thing I wanted to remind you of is that the 13F filings simply show us his U.S. equity positions. It doesn’t show you how much cash he's got sitting on the sidelines and also doesn’t show you his short positions.

For example, have a look at this: you know, in Q1 of 2022, his portfolio was worth 165 million dollars, right? He had 165 million invested. At the start of 2023, he only had 47 million invested. So, the reality is he's got about 118 million that's currently not invested long in U.S. equities. So this could be in short positions, or it could just be sitting in cash, which all of a sudden paints a much more bleak image of what Burry actually sees for the future of the market.

You know, 47 million invested and 118 million just sitting on the sidelines or short. With these 13F filings, you really have to remember to zoom out and think of the bigger picture. This bigger picture for Michael Burry would be very consistent with what he's been tweeting about lately.

So we know from past tweets Burry has been very bearish on the market. On the 1st of February, he released a tweet telling people to sell, and a few days earlier, he likened our current market situation to the tech bubble, hinting that we’re probably only halfway down the slope.

So the point is we definitely have to be careful when reading these 13Fs, and we just use them as potential ideas, lists of companies that maybe we’d like to do a little bit more research on ourselves. The other consideration to make with Michael Burry, of course, is that despite being value-minded, he is a very big fan of bouncing in and out of positions. His 13Fs are consistently inconsistent, so there is a decent possibility that, you know, just 45 days later, he's already made significant changes to how the portfolio looked as we were all watching the fireworks go off on New Year's.

But with that said, guys, that is Michael Burry’s updated portfolio for 2023. Thank you very much for watching. Of course, leave a like on the video if you did enjoy it, and with that said, I’ll see you all in the next one.