One of the Smartest Investors in the World is Betting on These Stocks Right Now

May 24, 2021

Rahul Shah, Editor, Profit Hunter

There's no better way to learn investing than to track the smart money.

And when it comes to smart money these days, it doesn't get better than Michael Burry.

I could reel off dozens of reasons as to why you should listen to Burry.

Here's the biggest of them all...

Burry was the rare outsider who warned of the housing bubble collapse back in 2008.

In fact, he not just predicted it but made a killing in the process. His bet against the housing market turned him into a celebrity, netting US$ 750 m for his clients and US$ 100 m for him personally.

Since then, he has made a habit out of taking bold contrarian calls and earning massive returns in a short span of time.

Take Gamestop for example. Not many people know that it was Michael Burry's tweet that may have started the massive bull run in the stock.

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The whole frenzy took the share price up a whopping 2,500% and its market cap swelled to an unbelievable US$ 34 bn.

Burry's profits from the whole episode? Well, US$ 250 m and change.

It's because of these big, bold bets and his razor sharp analysis that I have become a big fan of Michael Burry.

I try to follow his every move and am all ears to whatever he has to say.

The focus these days is the car maker Tesla. I have no idea if he loves the company's sleek cars.

But he definitely hates the company's stock.

What else would explain his big, short position in Tesla?

Yes, that's correct. He is now betting on the company's stock price to crash and crash big.

Why?

Simply because Tesla's valuations have shot through the roof. It's now believed to be more valuable than all the other car makers combined.

However, the irony is that Tesla still struggles to make profits.

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In fact, the company made more money trading bitcoin and selling environmental regulatory credits than selling cars in its latest quarter.

Of course, there are Tesla bulls who think that the company is still undervalued and has other businesses than can contribute majorly going forward.

However, Michael Burry seems to be winning this battle so far.

Tesla's stock price is down more than 30% from its life high earlier this year.

I think there's a lesson here for investors. No matter how great a company, there's a limit to which its valuations can rise.

You cannot buy a stock at any price, even if it's the best business in the world.

Also, profits need to be a fact on the P&L statement of the company and not some prediction that will come true in the future.

Absent these two conditions, the stock is more a speculation than an investment. It's also a sitting duck for skilled short-sellers like Burry.

Now it isn't that Burry is negative about everything. He is bullish on an energy stock. Yes, you heard that right.

At a time when everyone is talking about green energy, isn't it strange of him to hitch his wagon to an oil and gas player?

Not really. Stocks from the sector are beaten down alright but energy from oil and gas is here to stay.

This is a point that even Warren Buffett alluded to in his latest AGM. He believed that while the world will eventually transition to green energy, the shift is going to be gradual.

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Thus, oil and gas will have an important role to play in satisfying the world's energy needs for many years into the future.

Therefore, buying an energy stock that's beaten down a great deal, is a low risk-high return strategy in my view.

Last but not the least, Burry is also bullish on a clutch of transport stocks, maritime transport to be precise.

Even as the industry fortunes are improving, there seems to be a demand-supply imbalance in the field of global tankers and bulk carriers.

Thus, till new supply comes on stream, the sector will continue to enjoy strong tailwinds.

Well, the goal of this short detour into Michael Burry's portfolio is to highlight how the smart money thinks and analyses different opportunities.

It confirms Ben Graham's popular quote that you are neither right nor wrong because the crowd disagrees with you.

You are right because your data and reasoning are right.

Well, this certainly seems to be the case with Michael Burry's bets. He is least worried about the popular opinion or the consensus out there.

All he is trying to do is organise the body of facts into a picture that he feels has the closest resemblance to reality.

His track record is proof this approach has paid rich dividends for him. I am sure it will do the same thing to you as well.

What do you think, dear reader?

Is there any sector or industry where you think the consensus is wrong at the moment...and you are correct?

Let me know.

Warm regards,

Rahul Shah
Rahul Shah
Editor and Research Analyst, Profit Hunter

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2 Responses to "One of the Smartest Investors in the World is Betting on These Stocks Right Now"

Aditya Ahuja

May 24, 2021

I find Rahul Shah as good as Michael Burry.

I am a great admirer of Rahul Shah and like to read his posts as often as I can.

The BEST analyst at Equitymaster. Much better than Tanushree and Richa.

My salutes to Rahul Shah

Aditya

Like 

Venkat

May 24, 2021

No company can earn unlimited profits. If that is happening then there is something wrong. The company is abusing monopoly powers or something unethical is happening. So there will definitely be a upper limit beyond which buying the share becomes unattractive.

Like (1)
  
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