Michael Burry, the investor renowned for predicting the 2008 housing market collapse, recently made significant changes to his stock portfolio. Known for his foresight and strategic investments, Burry’s recent moves have sparked interest and concern among investors. In this article, we’ll explore his recent portfolio adjustments and what they might signal about the future of the economy.
Michael Burry’s Recent Sales
In 2024, Michael Burry sold approximately $50 million worth of stocks from his portfolio. This selling spree included some of his largest holdings, suggesting a cautious outlook on the US economy. Despite offloading these positions, Burry has reallocated his investments, indicating a strategic shift in his approach.
Burry’s sales included major tech stocks such as Amazon, Alphabet, and Oracle. These companies, which represented about 15% of his portfolio in 2023, have performed exceptionally well, gaining between 70% and 120% since the start of 2023. The stellar performance of these large-cap tech companies has driven their valuations to the highest levels in over two decades, reminiscent of the dot-com bubble of the early 2000s.
Valuation Concerns
The current PE ratio of US tech stocks stands at 30, meaning investors are paying $30 for every dollar these companies earn. In contrast, the average PE ratio for stocks today is around 15, making tech stocks twice as expensive as the average US business. Burry’s own tech holdings saw significant valuation increases, with Oracle’s PE ratio rising from 25 to 38 and Alphabet’s from 19 to 28. These steep valuations likely prompted Burry to sell.
Michael Burry’s Shift to Chinese Tech Stocks
Interestingly, Burry has turned his attention to Chinese tech stocks in 2024, substantially increasing his holdings in companies like JD.com, Alibaba Group, and Baidu Inc. His Chinese tech investments now total about $23 million.
Their main attraction appears to be their relative cheapness compared to US stocks, as Chinese stocks are currently at one of their lowest valuations relative to US stocks in over 15 years.
The Potential of Chinese Stocks
For Chinese stocks to increase in value, their earnings need to improve. Since 2018, Chinese company earnings have been on a decline, leading to the current low valuations. Burry seems to anticipate a turnaround, betting that these stocks could outperform US ones.
Adding Gold to the Portfolio
Beyond Chinese tech, Burry has also increased his holdings in gold, with around 7% of his portfolio now in the Sprott Physical Gold Trust. This move reflects his concerns about the US economy’s vulnerability and potential inflation. Historically, gold has been a safe haven during economic uncertainty, maintaining or increasing in value during turbulent times.
Historical Context of Gold’s Performance
Gold has shown significant price increases during key periods of economic turmoil:
- 1930s: During the Great Depression, gold prices doubled as banks failed and unemployment soared.
- 1970s: Faced with high inflation, oil shocks, and multiple recessions, gold prices increased 15-fold.
- Early 2000s: The tech bubble burst, the housing bubble burst, and the global financial crisis led to a sevenfold increase in gold prices.
- 2020: The COVID-19 pandemic triggered a global economic crisis, causing another surge in gold prices.
Gold’s Bullish Structure
Burry has expressed concerns about the economy’s vulnerability and inflation. It was only in Q1 2024 that he decided to buy gold, betting on these risks materializing. We also share Burry’s optimism on gold. We initiated trades on gold miners in late 2023, which is already up +30% today. Gold has broken out above key long-term resistance with key moving averages pointing upwards, indicating a strong uptrend.
Conclusion
Michael Burry’s recent portfolio adjustments provide valuable insights into his economic outlook. His significant sales of high-performing US tech stocks and increased investments in undervalued Chinese tech and gold suggest a cautious approach, preparing for potential economic challenges. Burry’s moves underscore the importance of valuation and diversification in investment strategies, offering a lesson for investors looking to navigate uncertain market conditions. Click here to sign up! Subscribe to our YouTube channel and Follow us on Twitter for more updates!
