Dr. Michael Burry has been a very popular topic on Greenbackd recently as a result of Michael Lewis’s The Big Short and the Vanity Fair article Betting on the Blind Side. I have posted a link to Burry’s techstocks.com “Value Investing” thread (now Silicon Investor) and another to Burry’s Scion Capital investor letters, but the thirst for all things Burry remains undiminished. The New York Times now has an article, The Origins of Michael Burry, Online, discussing some of Burry’s early postings on his techstocks.com thread. Here Burry discusses his strategy for shorting:
I mentioned that I pick stocks to short based on valuation, not ratios (I ask you to find the correct free cash flow — I bet most people don’t kow they’re working with negative net working capital, either). But I ENTER based on technical analysis. KO could go up or down. The odds are down, technically, but that’s what buy stops are for. This isn’t a long term short by any means. Research on shorts show that profitable shorts make money with small gains, not by waiting for businesses to bankrupt. The small gains are usually there for the picking. Another indicator — if it’s mentioned in Barron’s as a buy three different times <g> — set me onto Wells Fargo.
What’s there to understand about Coke? The business is a KISS model. This gets to my value/short strategy. When people start claiming a business deserves a special valuation above all reasonable fundamental analysis (because of the “franchise”, because there’s so little institutional ownership for a big cap growth stock, because Buffett’s in it, because global expansion will provide endless opportunity, because ROE is so damned high, because it’s nearly a monopoly, because Buffett’s in it…), that’s a short, IMO.
I just read a bunch of Graham, and he doesn’t deal with shorts (I assume it would be “speculation”), but EMT isn’t all that its panned to be either, IMO.
Just trying to think independently,
The NYT has also unearthed a Forbes magazine article from 2000:
VALUESTOCKS.NET www.valuestocks.net Supposedly for value investors, though Warren Buffett might not agree with this definition of value. Run by a 28-year-old neurology resident, Dr. Michael Burry, Valuestocks.net showcases Burry’s own $50,000 portfolio, which includes some surprising choices including Pixar, the maker of Toy Story. Has good information on how to identify net-net stocks (trading for less than assets minus all conceivable liabilities). Accompanying all this are Burry’s incisive reports, as good as anything from Wall Street. One of the site’s best features is a list of essential finance texts, including thumbnail reviews and links to Amazon.com (Burry’s only source of revenue, since he doesn’t accept banner ads). BEST: Original analysis, links to great finance sites, and a must-read book list for value investors. WORST: Limited content is sometimes dated.
It seems Greenbackd is rapidly, if unintentionally, becoming Mike Burry’s Of Permanent Value, which is Andrew Kilpatrick’s encyclopedic collection of stories about Warren Buffett. Incidentally, my copy of Of Permanent Value is around ten years old, which means it’s one-third the size of the 2010 edition (I’m not even joking. Mine came in a single volume, and it now seems to be a three-volume extravaganza. Buffett has been busy over the last 10 years).