Michael Burry's HUGE New Bet on ONE STOCK

[Music] Hey guys, welcome back to the channel! In this video, we are going to be looking at another famous investor's Q2 2020 13F filing. Of course, the 13Fs have just been dominating the news over the past couple of weeks; they've all come out at once. So, the famous investor that we are looking at today is, of course, Christian Bale himself. No, of course it's not! It is Michael Burry.

But I do find it pretty sad that people definitely recognize this image a lot more than they recognize this image. If you don't know what I'm talking about, yes, Christian Bale is the actor that plays Michael Burry in the movie, "The Big Short." If you've seen that movie, it's a fantastic movie. The reason that Christian Bale plays him is because Michael Burry is one of those investors that predicted the housing bubble in 2008. He saw the Great Recession, or whatever we call it these days, the financial crisis. He saw it coming. He made a big bet that the housing market would just absolutely explode, and it did. He made a whole lot of money!

But that's not what we're talking about today. Let's have a look at his most recent buys and sells, what he has added and gotten rid of in his stock portfolio. If you've been missing the recent videos I've been uploading, and you haven't caught any of the content I've made around 13F filings, then if you don't know what that is, a 13F filing is a quarterly filing that institutional money managers have to make with the SEC if they have more than a hundred million dollars in assets under management.

So what it does is it discloses the biggest investors in the world; it discloses their equity holdings, so what they hold in their stock portfolios. And then you can look quarter after quarter unless you can see what they've been buying, what they've been holding, and what they've been selling. Now, of course, nobody actually does that, and that would take a long time; it would be very painful.

These days, you can go onto websites such as GuruFocus or DataRoma, where they basically compile all of the buys and sells into big tables that are much easier to read. You can just follow whatever investor you would like to; you can follow their 13F filings, and it's nicely summarized. So that is where I find my information.

Anyway, back to Michael Burry. He has made some interesting moves, actually, in Q2 2020. He, of course, manages money under the name Scion Capital, where their stock portfolio is currently worth about 91 million dollars. So, not going to go into it too deeply, but in Q1, his stock portfolio looked like this, and now in Q2, his stock portfolio looks like this.

So Q1 was a pretty diversified split; he had 10-plus positions in Jack in the Box, in GameStop, Corvo, Facebook, Maxar Technologies, and Boeing. Now, since then, he's sold out of five stocks and he has added nine stocks, so he's definitely been a big mover in 2020. Now his largest positions are in GameStop, in Bed Bath and Beyond, in Discovery Communications, and all three of those positions occupy more than 10% of his portfolio.

But what's interesting is that none of that was really the big news of Michael Burry's 13F this quarter. In fact, the big news was that Michael Burry's Scion Capital has sunk a lot of money into buying call options. So what we've just discussed is his equity holdings, his stock holdings, his investments in different companies, what he actually holds.

But in this 13F, we've also got detail on his call option positions. So as a bit of a refresher, what is a call option? We'll start with what is an option in general. Remember, an option is just a contract; it is a bet placed between two investors. One of the investors is writing the call option, and then the other investor is buying the call option off of them.

So what does a call option actually say? Well, it says that if ABC company’s shares go past the price of X, then as long as you exercise those options before they expire, I'll allow you to buy my shares off of me for that X price. Now, if you were the investor that bought that call option off that other investor, you want the company's stock price to go up because if the stock price goes up and it meets the terms of the options contract, you can go back and wave your options contract back in the face of the other investor and say, "Hey, hey! The stock price has gone up past the call option's strike price, and that means you, sir, have to sell me your shares at our pre-agreed on price way back when you wrote me that option."

So you get to buy the shares at a cheaper price than what they are currently valued at, now at just a month at the market price. And of course, you can just turn around and sell those shares and make an instant profit. So that's how you make money buying call options. But remember, every options contract has an expiry date.

Okay, so if the ABC company's share price does not rise to the option's strike price by the expiry date, then the option expires worthless. Okay, in which case you can't exercise that contract; okay, it's expired worthless. So essentially, that other investor has just sold you a very expensive piece of paper. Well, it's not even a piece of paper, right? It's just all electrons. So literally, you've just paid them, and they've given you literally nothing.

So going back to Michael Burry, he has been taking up call option positions in a few different companies. Now, what this means is that he expects the share price of those companies to go up. If the share price goes up past the strike price for his call options, then he makes money. Now, unfortunately, one thing that we don't know is we don't know what the strike price of his various options are for these different companies, and we also don't know when those options expire, so definitely keep that in mind.

Now, going back, remember when I said before that Scion Capital's stock portfolio was worth 91 million dollars? Well, I was telling the truth there, but in all honesty, their total long portfolio is actually worth 315 million dollars. Now they call it a long portfolio because technically speaking, when it comes to the 13Fs, short positions aren't included. But anyway, that's besides the point.

Really, what I'm saying here is that yes, they only own 91 million worth of stocks, but their portfolio is actually worth 315 million dollars. So that actually makes their total long portfolio, it doesn't look like this; it actually looks like this. So his big normal stock investments don't actually look so big anymore, and that's because obviously, so much of his portfolio is going towards these call option positions.

The first one I wanted to talk about is the fourth largest, and that is in Goldman Sachs. So obviously, Goldman Sachs is a big U.S. bank. Like all the banks, it got absolutely pummeled with the shutdown; however, like every company over in the United States, basically since the 23rd of March, it has just been going on an absolute tear. That's when the Fed came out and said they're going to support the market, blah, blah, blah. I've spoken about that in previous videos; if you want to go check that out.

But essentially, since the 23rd of March, Goldman Sachs, like a lot of other stocks, has just been on an absolute tear. So this call option position is worth 14.5 million dollars to Scion Capital. It represents 4.6% of their total long portfolio, so it's a pretty sizable position. But there are some ones that are definitely a little bit bigger, so let's move on into the third biggest call option position, and that is in Booking Holdings.

So that position is worth 18.47 million dollars or 5.86% of the portfolio. So Booking Holdings is obviously that big global online travel-related services company. So you can think of, obviously, Booking.com, which is flights and accommodation. There's also Kayak and Priceline. Now, if you're an Australian, it's probably not the Priceline you're thinking of. There's also Agoda, and finally, RentalCars.com, and also OpenTable.

So obviously, this company is all about getting out there, traveling, booking stuff, having a great time, and of course, 2020 says no. So, the stock took an absolute beating; it was down 45%, but since its low, it's actually rebounded up 60%. So if we just look from the start of Q2 2020, which is what we're looking at for this 13F filing, it's actually gone up 44%. So Barry's probably done pretty darn well with his call options for Booking Holdings.

Then moving on, his second-largest call option position was in Facebook. So Facebook, I don't think I need to go into this one. Obviously, social media giant Facebook, Instagram, WhatsApp, Messenger, all owned by Facebook. What's really interesting is that Michael Burry has gone from an owner of the stock in Facebook to he's actually ditched the stock, and now he's just bought into these call options.

So his Facebook position is worth 21.1 million dollars, and it takes up 6.7% of Scion Capital's portfolio. Of course, Facebook has been a really big winner recently; even just since the end of Q2, which is obviously the time period we're looking at here, it's up 70%. So, I mean, whether you own call options, as Barry does, or whether you just own the common stock, like most people do, you're doing very, very well if you've got Facebook in your portfolio right now.

Anyway, moving on, that is Facebook. I don't think we need to go too much into Facebook, but I think it's fair to say that Barry's probably doing quite well owning Facebook call options. Anyway, now, let's go on—this is really the last one. The biggest call option position that Barry has, or that he added in this quarter, this is the one that made the big news headlines, right? And for good reason too!

So his biggest call option position is worth 113.1 million dollars, and it occupies 35.9% of Scion Capital's portfolio. 36% of their whole portfolio just sunk into call options on one company, and that company was, of course, Google. It was Alphabet. Now personally, if that was me, I would be very, very nervous.

But then again, okay, Michael Burry, he is known to make big bets; that's why he is the famous investor that we all know today. He made a big bet that the housing bubble was going to pop, and it popped in a big way, and he made a ton of money. Michael Burry is not one to shy away from placing big bets if he thinks he is definitely right, and he's definitely done that in this case.

But the reason that I would personally find it very nerve-wracking to hold 36% of a portfolio just in call options in one single company is because call options, they're a little bit different from just owning shares in the company, right? So if you owned shares in Google, and you believed in it long term, then it's unlikely that—yes, it's possible that you could lose 100% of your investment—a company like Google, it's just not going to happen. Right?

So even if they had a bad patch and you were down even considerably on your original position, you could ride out those bad times. You could hold the stock for a very long period of time and wait for those shares to recover, however long that might take. Okay, so it's unlikely, first of all, that you're going to lose 100%, and you can also just wait out the bad times until hopefully you make a return in the long run.

With options contracts, it doesn't work like that, right? You are making a bet that something will happen by this date, okay? And if that doesn't happen by that date, then your options contracts expire worthless. So you can lose 100% of your position if things don't go your way. However, that—so that's why it would make me nervous, anyway. But of course, as I was saying, however, it has worked out remarkably well for Barry.

He would definitely be making a big pile of cash from his call options in Google because since the start of Q2, Google stock is up 43.83%. So even though me, as the small-time pleb investor, would feel very nervous making a 36% bet just in call options on one company, it's probably worked out pretty darn well for Michael Burry.

And that is the big position that was making the headlines coming out of this 13F filing for Michael Burry. So anyway, guys, that is what Michael Burry is doing with his portfolio, or Scion Capital's portfolio for Q2 of 2020. Not some— not crazy when it actually comes to the stock portfolio.

Although he did take away a lot of stocks and added a lot of new stocks, he's definitely a mover. But of course, the big news story is all of those different call option positions that he's taken up, which pretty much all of them look to be doing quite well. I imagine he is in the money for pretty much well all of those positions.

But anyway, I'd love to hear from you guys. What do you think about this? It's obviously big bets from Michael Burry. Would you be comfortable taking the same kind of bets that he does? He certainly has a lot of confidence that he knows—he really believes in himself and what he is, you know, he definitely believes what he thinks is going to actually happen.

But of course, that's one characteristic that's made him a lot of money. I certainly wish I had as much money as he does right now. But there you go. Anyway, guys, that's it for this video! Leave a like on the video if you did enjoy it; of course, I super appreciate it. It always helps me out, and it's the easiest way to support the channel, so I super appreciate you guys just smashing the like button, annihilating the like button, to put it, you know, in the words of Graham Stephan.

But anyway, guys, that's it for me for today. If you'd like to learn more about how I go about my investing—active investing, passive investing—check out Profitful; links are down in the description below. But that'll do me today, guys. Thanks very much for watching, and I'll see you guys in the next video. [Music] Let them take advantage of swelling on wrecking off record deals. Tell them, talk to calling for the quote.