Tag: Michael Burry

Was Michael Burry Wrong to Say, “I Was Wrong to Say Sell”?

Posted on by phoffman@channelchek.com

Michael Burry Has a Huge Bet According to His Just Filed SEC 13-F Report

It looks like Michael Burry has changed his mind, again. At the beginning of 2023, Burry,  the founder of Scion Asset Management, was not positive at all on the stock market. The market then moved up in an epic rally. By late March, he announced in a tweet, “I was wrong to say sell.” Over the coming months stocks that had been beaten down the prior year, moved up significantly.

In his quarterly SEC 13-F filing today, the hedge fund manager that was portrayed in the movie “The Big Short” reported that he is more than just short the S&P 500 and Nasdaq 100. Burry held a huge leveraged short position as of June 30th. The position represents 84% of Scion’s assets under management (AUM), and is in the form of an all-or-nothing marketable options trade.

Source: Koyfin

About His Position

Burry recognized losses during the second quarter. The long positions he had put on earlier were underwater when he sold. The only conclusion is that he must have switched again from bullish to bearish – at least on these specific stocks. He then, with a broad brush, shorted large-cap stocks using stock options on ETFs. As of quarter-end 51.05% of his portfolio held puts on SPY and 42.54% held puts on QQQ.

Burry manages $1.7 billion. The puts used to short the S&P 500 ETF (SPY) and Nasdaq 100 (QQQ) is a broad brush that shows a great deal of confidence that large-cap stocks are headed lower before the options expire. It is a huge bet, while a short using puts has less downside than a straight short that, if unmanaged, can move against the owner an infinite amount, options have a window when they can be sold or exercised. If the position doesn’t work out, losses can be 100%.

Take Away

A lot can be learned from celebrity investors and fund managers. The lesson that investors may glean from Michael Burry’s first six months of 2023 is that you don’t sit in a bad position. Or, changing your mind is okay. The new positions indicate a high degree of confidence that large-cap stocks will fall apart over the coming months. It is just two positions, but they speak volumes in terms of his market call.

Paul Hoffman

Managing Editor, Channelchek

https://whalewisdom.com/filer/scion-asset-management-llc

https://www.channelchek.com/news-channel/michael-burry-suggests-he-is-now-bullish

Retail Investors Await Institutional Investors’ SEC Filings

Posted on by phoffman@channelchek.com

For the Third Time This Year, Investors Get to Peak Behind the “Smart Money” Curtain

What’s smart money doing?

If retail investors weren’t always eager to know what hedge fund managers, corporate insiders, and others building positions in a stock have been doing, shows like CNBC’s Closing Bell, news sources like Investors Business Daily, and communities like Seeking Alpha would get far less attention. Next week, the most followed institutional investors are expected to make their quarter-end holdings public. This will usher in a lot of buzz around the surprise changes in holdings and even short positions in celebrity investor portfolios.

Popular SEC Filings

The most popular SEC filings from the supposed “smart money” that small investors look to for ideas are:

Form 13D – This is a filing that is required to be made by any person or group that acquires 5% or more of a company’s voting securities. The filing must disclose the person’s or group’s intentions with respect to the company, such as whether they plan to take control of the company or simply invest in it.

Investors may recall Elon Musk’s accumulation of Twitter shares was incorrectly filed on form 13-G which is for passive investors. He later had to amend his filing on 13D as his accumulation of shares was discovered to be predatory.

Form 4 – This is a filing that is required to be made by any officer, director, or 10% shareholder of a company when they buy or sell shares of the company’s stock. The filing must disclose the number of shares bought or sold, the price per share, and the date of the transaction.

This is the filing that the public used to discover that in 2021, Mark Zuckerberg sold Meta (META) shares (Facebook) almost daily for a total of $4.1 billion. The same year Jeff Bezos sold $8.8 billion worth of Amazon (AMZN) stock, mostly during the month of November.

Both of the filing types mentioned above are as needed, they don’t have a recurring season. However, another popular filing is form 13-F, these much anticipated filings occur four times each year.

Form 13F – This is a quarterly report that is required to be filed by institutional investment managers with at least $100 million in assets under management. The report discloses the manager’s equity and other public securities, including the number of shares held, the CUSIP number, and the market value.

Investors will pour over the quarter-end snapshot of the account and measure changes from the prior quarter, especially from investors like Warren Buffett, Bill Ackman, and Cathie Wood for insights. When Michael Burry filed his 13-F in mid May 2022, he had a position showing that he was short Apple (AAPL). Headlines erupted across news sources, and this certainly had an impact on the tech company’s stock price as other investors questioned its high valuation against any positions they may have had.

The Consistency of the 13-F

The SEC 13-F is a regular filing for large funds. Interested investors can generally mark their calendars for when a funds 13-F will be released. The SEC requires a quarterly report filed no later than 45 days from the calendar quarter’s ends. Most popular managers wait until the last minute, as they may not be so eager to share their funds positions any sooner than needed. This means that most 13-F filings are on February 15 (or before), May 15 (or before), August 15 (or before), and November 15 (or before). In 2023, August 15th is next Tuesday. During the second quarter of 2023 there seemed to have been significant sector rotation, and a reduction in short positions among large funds. This will make for above average interest.

Famous Investors that file a Form 13F

The legendary investor Warren Buffett is the CEO of Berkshire Hathaway. His company’s Form 13F filings are closely watched by investors around the world.

Warren Buffett, last filed a 13-F on May 15, 2023

Ray Dalio is the founder of Bridgewater Associates, one of the world’s largest hedge funds. His company’s Form 13F filings are also very popular with investors.

Ray Dalio, founder of Bridgewater Associates, last filed a 13-F on May 15, 2023

Michael Burry is the investor who famously bet against the housing market in the lead-up to the 2008 financial crisis. His company’s Form 13F filings are often seen as positions of a highly regarded contrarian.

Dr. Michael Burry, last filed a 13-F on May 15, 2023

Cathie Wood is the CEO of ARK Invest, a firm that invests in disruptive technologies. Her company’s Form 13F filings are often seen as a bellwether for the future of technology. Wood is always open and transparent about her funds holdings. This may explain why she is among the earliest filers after each quarter-end.

Cathie Wood, last filed a 13-F on July 10, 2023 for the second quarter ended June 31, 2023

Drawbacks to Using Form 13F

While Form 13F filings can be a valuable source of information for investors, it isn’t magic. And if it is going to weigh heavily as part of an investor’s selection process, some drawbacks should be considered.

The information is delayed: Form 13F filings are not real-time information. They are usually filed 45 days after the end of the quarter, so the information is already outdated by the time it is available to the public.

The information is not complete: Form 13F filings only disclose the top 10 holdings of each fund. This means that investors do not have a complete picture of the fund’s portfolio.

It is not always clear if a position is based on expectations for the one holding, or should be viewed in light of the full portfolio, balancing risk and potential reward. For example, an investment manager may be bullish on tech and long a tech megacap with a lower than average P/E ratio and as of the same filing, short a similar amount of a tech megacap with a higher P/E ratio. The fund manager may be bullish on both, and the nature of the positions may indicate an expectation that the P/E ratios are likely to move toward a similar ratio. If there is just a focus on one side (long or short), the investor may read the intentions or expectations wrong.

Take Away

As earnings season fades, the third week in August will provide a mountain of information on what institutional investors were doing during the second quarter. This is a great place to find ideas and understand any changes in flows.

Investors should be cautioned that this is only a June 30th snap shot, and these holdings may have changed days later.’

Paul Hoffman

Managing Editor, Channelchek

Sources

https://fintel.io/search?search=ray+dalio+13-f

https://fintel.io/i13fs/ark-investment-management

https://whalewisdom.com/filer/scion-asset-management-llc

https://www.vrresearch.com/blog/learn-about-hedge-funds-from-13f-filings

https://www.forbes.com/sites/rachelsandler/2022/01/06/mark-zuckerberg-sold-facebook-stock-nearly-every-weekday-last-year-for-almost-11-months/?sh=6cebeeb03f71

https://www.sec.gov/Archives/edgar/data/1418091/000110465922045641/tm2212748d1_sc13da.htm

Antitode for a Potential Indexed Fund Bubble?

Posted on by phoffman@channelchek.com

Equity Research Allows Investors to More Confidently Step Away from the Growing Index Valuations

Hedge Fund Managers Michael Burry and Bill Ackman have expressed deep concern over indexed funds for a years and for different reasons. Burry primarily fears a bubble growing, and Ackman agrees but also fears investors are giving away control to parties that may not have their best interests at heart. Both make understandable cases. Below we discuss the overall concerns and how an individual investor who shares their concerns may “hedge” their portfolio against these risks.

Michael Burry

“The bubble in passive investing through ETFs and index funds as well as the trend to very large size among asset managers has orphaned smaller value-type securities globally,” Michael Burry told Bloomberg News in August of 2019. “Orphaned” presumably refers to a lack of attention now paid to this market segment.

Burry’s concerns centered around the idea that the rise of passive investing could lead to distortions in the stock market. He believed that as more and more investors put their money into indexed funds, the valuations of the companies included in those indices might become disconnected from their underlying fundamentals as fund managers were required to own the index at the established weighting. In his view, this could create a bubble-like situation where certain stocks are overvalued due to indiscriminate buying driven by the popularity of index funds.

While many view this hedge fund manager, made most famous by the movie The Big Short, as a pessimist, it is easy to think of him as an optimist finding opportunity, even where there could be trouble.

As he discussed then, the rush into indexed funds has punished small cap value stocks. Burry also highlighted, “There is all this opportunity, but so few active managers.”

Bill Ackman

“We believe that it is axiomatic that while capital flows will drive market values in the short term, valuations will drive market values over the long term. As a result, large and growing inflows to index funds, coupled with their market-cap driven allocation policies, drive index component valuations upwards and reduce their potential long-term rates of return,” according to Bill Ackman in a statement which agrees with Burry’s thoughts. Bull Bill Ackman also sees another risk.

In a letter to shareholders earlier this year, the activist investor, and big boss at Pershing Square Capital, made the point that the passive funds not only follow indexes but encourage active managers to stay close to the index where investors pay for active management, but get index-like results because the fund company fears shareholder reaction if returns deviates sharply from the index benchmark.

More telling is Ackaman’s fear of proxy votes and other governance taken out the hands of the masses and bestowed on so few. Ackman believes that passive managers like Vanguard, BlackRock, and State Street hurt investors by concentrating corporate power in a small group of players “who get larger by the minute.” With 20%  or more of fund flows headed to an indexed fund or ETF, Ackman wonders who will “look out for one another’s interests?”

Actively Managed and Self-Directed Investing

The Nasdaq 100 index just reorganized in order to lessen potential risks to being overweighted in a few stocks. Surrounding this event and through the years there has been no shortage of discussion around index bubbles and why some see indexes as an eventual train wreck:

“Is There an Index Fund Bubble?” (Bloomberg, September 4, 2019)

“The Index Fund Bubble Is Coming” (The Motley Fool, January 23, 2020)

“Is the Index Fund Bubble About to Burst?” (Investopedia, March 11, 2021)

“The Index Fund Bubble Is Real, and It’s Going to Burst” (MarketWatch, April 20, 2022)

“The Index Fund Bubble Is Even Bigger Than You Think” (Barron’s, May 23, 2023)

And there is also fear in the consolidation of power into the hands of a few fund companies that could impact all of us more subtly.

While index fund investing is growing in popularity and has been rewarding, investors can prepare by scaling down these investments and making their own selections, weighting their portfolio in a way that makes more sense in light of the risks to them. This could include seeking managed funds with a manager that has a good track record over the years, but it also may mean adding stocks that are not well represented in major indexes. Investors like to use Morningstar for fund selection, for stocks information including excellent research on what Burry termed “small-cap value stocks,” and other small and microcap offerings is likely found on Channelchek.

The Forgotten Benefits of Equity Research

Informed stock market investors read equity research reports for several reasons:

Informed Decision-Making: Equity research reports provide detailed analysis and insights about a company’s financial performance, industry trends, competitive landscape, and growth prospects. Investors may save weeks putting together enough information to believe they understand an opportunity enough to make a decision.

Valuation Insights: Research reports will include valuation models that estimate a company’s intrinsic value. This can help investors understand whether a stock is overvalued, undervalued, or fairly priced, guiding their buy, sell, or hold decisions. Some research will actually provide an analyst’s price target.

Risk Assessment: Equity research reports assess the risks associated with an investment. This could include factors like regulatory changes, industry volatility, management quality, and financial stability. Understanding these risks helps investors manage their portfolios effectively.

Industry and Market Trends: Research reports not only focus on individual companies but also provide insights into broader industry trends and market dynamics. Investors can gain a better understanding of how macroeconomic factors might impact their investments.

Company Performance Analysis: Detailed financial analysis in these reports helps investors understand a company’s revenue streams, profit margins, debt levels, and growth potential. This information is crucial for evaluating a company’s overall financial health.

Competitive Landscape: Equity research reports often compare a company’s performance to its competitors. This analysis helps investors gauge a company’s competitive position within its industry.

Long-Term Investment Strategy: Investors with a long-term perspective can benefit from equity research by identifying companies with strong growth potential, sustainable competitive advantages, and solid management teams.

Industry Diversification: Research reports can make it easier for investors to diversify holdings by defining the category the company is in and even highlighting opportunities in various sectors or industries.

News Interpretation: Equity research reports can provide context and interpretation for press releases and other news including, earnings releases, and developments related to the company. This helps investors understand the potential impact on the stock price.

Investor Growth: For novice investors, equity research reports can provide valuable insights into how professionals analyze stocks and make investment decisions, enhancing their investment knowledge over time.

It’s important to note that equity research reports are typically produced by financial analysts working for brokerage firms, investment banks, or independent research firms. Investors should exercise critical thinking and compare and contrast multiple sources of information.  

Take Away

Credible professional investors make the case that the surging assets in index funds are leading to a bubble. There is also concern that control is taken out of the hands of individuals and placed in the hands of a few large companies whose corporate interests may not match individual investor interests.

Taking back control of the management of one’s portfolio may seem daunting, but quality equity research is a tool that can serve to help the selection process while at the same time increasing the self-directed investors’ understanding of what is important to watch. Channelchek is a no-cost platform leading the way in North America, providing company-sponsored research on small and microcap stocks.  

Individual stock investors may also wish to consider attending NobleCon19, in December. This investment conference is widely recognized as the place investors go to discover small emerging companies that they may act upon through their traditional brokerage account. Discover more about about NobleCon19 here.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://www.bloomberg.com/news/articles/2019-08-28/the-big-short-s-michael-burry-sees-a-bubble-in-passive-investing

https://www.harriman-house.com/press/full/2958#:~:text=%E2%80%9CIndex%20funds%20and%20other%20passive,is%20good%20reason%20for%20this.

https://www.marketwatch.com/story/bubble-in-passive-investing-offers-small-cap-opportunity-big-short-investor-says-2019-08-28

The Big Position – Michael Burry’s Holdings

Posted on by phoffman@channelchek.com

Michael Burry, What He Bought, What He Sold, and What He Held

I mark my calendar for the four times a year that Michael Burry is required to make his quarterly holdings public. The founder of Scion Asset Management, who gained additional fame by the portrayal of him in the movie The Big Short, is not a follower of other investors. He does his own unique number crunching and analyzing and is often at odds with mainstream investor thinking. This week he filed his 13F with the SEC, which shows his holdings of publicly traded securities as of the close of business on March 31. It is important to note that his holdings at the close of the following trading day may not be the same.

The Dramatic Holdings Shift

There has been a conspicuous shift in the holdings in Burry’s hedge fund. For the first time that I can recall, he has taken large long positions in companies domiciled in China. This includes an increase in holdings in e-commerce company JD.com Inc. (JD) and retailer Alibaba (BABA).

These positions stood at quarter-end as the largest holdings of Scion, representing 20% of securities held. Many hedge funds have gone sour on investing in Chinese tech companies, Burry isn’t necessarily a contrarian, but it is not unusual for him to be at odds with his peers. Hedge funds’ net exposure to China has dropped to 10.5% from 13.3% in January, according to data from Goldman Sachs Group Inc.’s Prime Services unit. If other large investors are early to the party, or late, that allows him to buy into weakness, or sell into strength – if he’s right.

The Big Position

How big are his positions? After purchasing Alibaba and JD.com in the final months of 2022 as China ended its zero covid 19 policy, Burry, who had held JD.com as of the previous two 13F filings, added to the holdings. His bigger stake more than tripled to 250,000 shares, worth $11 million, or 11% of his portfolio. The report shows his holdings of Alibaba had doubled.

It is not just notable that Burry is long, but that he held larger long positions than he has in many quarters.

The report, which is a snapshot taken just a couple of weeks after Silicon Valley Bank (SVB) shook investors in financial stocks, shows that Michael Burry jumped in and bought shares of smaller banks in the first quarter – where there is fear, there are knee-jerk reactions to take advantage of. In fact, he appears to have jumped into the middle of the firestorm adding long positions of First Republic, Pacific Western (PACW), Western Alliance, New York Community Bank, and Huntington Bank (HBAN) last quarter. Burry also bought other financial stocks, specifically Wells Fargo (WFC) and Capital One (COF). There is no indication if these worked out for the investors in his fund.

Energy, Commodities, and Other Long Positions

Burry also ended last quarter with new positions in energy and commodity stocks. These may be an inflation hedge trade. Holding cash during periods of higher inflation is akin to sitting still while watching money blow away. While there is no guarantee that the investment alternative to cash will do better, the sectors have a long history that supports the trade. Scion was invested in Coterra Energy (CTR), Devon Energy (DVN), and Sibanye Stillwater (SBSW).

Burry closed out the quarter with shares in various other companies including Zoom Video (ZM), The RealReal (REAL), and Signet Jewelers (SIG).

He still maintains his long-term position in Geo Group (GEO). Geo is the world’s second largest private “prison company.” Geo Group has the honor of being  Scion’s longest held position, put on sometime after the incoming administration sought to do away with privately owned prisons. Investors interested in how Geo Group navigated this challenge and is now finding other growth opportunities to utilize its assets, may wish to attend one of three no-cost roadshows in May that are part of the Noble Capital Markets and Channelchek Meet the Management Series. (Get more information here).

Closed Out and Longest Held Positions

Scion exited its positions in Wolverine Worldwide (WWW), MGM Resorts (MGM), Black Knight (BKI), Qurate Retail (QRTEA), and SkyWest (SKYW).

Source: Capedge.com

Take Away

The next Scion Asset Management 13F is expected to be filed on August 15th. While current holdings are unknown, much can be discerned from what top investment managers traded at the time. This information can help guide current thinking. When he has conviction, Michael Burry is not afraid to pull the trigger, long or short. As we have seen, when he lacks conviction, he is equally unafraid to keep his powder dry and sit on the sidelines. Inflation adds a cost to sitting on the sidelines. In late March he was very long and seemed to be gravitating toward segments that were being shunned.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://www.goldmansachs.com/what-we-do/FICC-and-equities/prime-services/

https://www.sec.gov/Archives/edgar/data/1649339/000090514823000408/xslForm13F_X02/primary_doc.xml

https://capedge.com/filing/1649339/0000905148-23-000408/13FHR/file/2

Michael Burry Warns Against the Market Hoping for Economic Weakness

Posted on by phoffman@channelchek.com
Image Credit: Yahoo (YouTube)

Further Evidence of his Future Outlook is Provided By “The Big Short” Michael Burry

It has been three-plus years since Michael Burry first warned that index funds’ popularity is creating distorted valuations of stocks included in the larger indexes. The reason for his warning is fund managers need to own the companies in the index. This creates buying pressure on stocks that might not otherwise be as strong of a buy candidate. In other words, investments are not being purchased on their own merit and, therefore could be thought of as overvalued. He called this the “passive investment bubble,” and he is still warning investors about a stock market investment bubble.

“Difference between now and 2000 is the passive investing bubble that inflated steadily over the last decade,” he tweeted late last year. “All theaters are overcrowded, and the only way anyone can get out is by trampling each other. And still, the door is only so big,” Burry said in October 2022. While his SEC filings show he is not opposed to owning individual stocks with a unique opportunity, he’s expecting a market collapse that dwarfs the dot-com crash because there’s so much money parked in index funds.

This week Burry provided a backup argument to his thesis in the form of a chart. The Bloomberg produced chart showed the S&P’s 40% plunge between February 2001 and October 2002. The S&P data was plotted alongside the sharp decline in the Fed Funds overnight benchmark interest rate. Burry’s latest tweet suggests a feeling of deja-vu that includes the stock market’s surge in early 2001, when rates were 6%. There seems to be concern that market participants are looking for enough weakness for the Fed to drop rates. The chart, and his written message is one to be careful what you wish for.

His tweet read, “This time is different.” This apparent sarcasm could be read, if you want lower rates, it may come at a cost.

Image: @michaeljburry (Twitter)

Burry seems to expect enough economic weakness that the Fed will again ratchet down rates in a hurry. The poor economic scenario would likely cause the S&P 500 to tumble.

Take Away

Higher rates encourage traditional savings, which then becomes money not used to stimulate the economy.  It also slows growth by making borrowing more expensive. This dampens demand and increases the risk of a bad recession. Burry, a widely followed hedge fund manager has been warning of the broader market taking a huge hit.

Burry has noted that blistering but brief rallies are common during market downturns.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://www.thestreet.com/investors/jim-cramer-michael-burry-tweet-seemingly-opposite-views-on-the-market-15-minutes-apart

https://markets.businessinsider.com/news/stocks/big-short-michael-burry-stock-rally-dot-com-bubble-crash-2023-2

https://nypost.com/2022/10/03/michael-burry-flags-passive-investing-bubble-as-market-risk/

Michael Burry Wonders Aloud if Facebook Knows What It Wants to Be

Posted on by phoffman@channelchek.com
Image Credit: Marco Verch (Flickr)  

Is Meta the Wrong Path for Facebook, or is it Just Ahead of its Time?

Not all ideas are good ideas, even when they come from billionaire tech start-up founders like Mark Zuckerberg.

Michael Burry, the legendary investor of “Big Short” fame, has been criticizing the social media giant’s metaverse strategy. Burry joins others in questioning why Zuck would change the Facebook formula and spend billions embracing something that is far from real. Many of Zuckerberg’s critics are other successful billionaires like Elon Musk and Mark Cuban. Other critics are investors that have endured Meta share’s 62.3% ($570 billion) decline since January.  

Burry founded and manages the hedge fund Scion Asset Management. Burry tweeted a message that seems to say Meta management blew it – and suggests they have blown it by historic proportions by taking a deep dive into something that may or may not have legs – the metaverse.

Image: @BurryDeleted (Twitter)

You don’t have to have been alive in the mid-1980s to know what Burry was saying when he posted, “Seems Meta has a New Coke problem.” Any business school textbook lists Coca-Cola’s changing the formula of its best-selling product as the #1 lesson in corporate blunders. It was an expensive change that failed miserably and caused the company to revert back to its original product or risk losing a lot more ground against rivals.

A Sweet Refresher

New Coke was a much sweeter version of the Coca-Cola people had become accustomed to using to wash down their pizza slices, or a burger and fries. It was introduced by Coca-Cola in April 1985 during the cola war Pepsi was waging.

At the time Coca Cola was perhaps one of the most recognized brands in the world. But, Pepsi stole customers after it ran a few Michael Jackson commercials suggesting its sugar water was the “choice of a new generation,” and also backed it up with ads showing blind taste test preferences. Between the taste test science and everyone wanting to be more like Michael Jackson, Coke lost market share. Coke reacted by reformulating its product and did its own blind side-by-side tests that indicated that consumers seemed to prefer the new sweeter taste, similar to Pepsi. The company then decided to market the reformulated recipe – New Coke was born.

Max Headroom was the spokesman for New Coke, Like the Grand Canyon (Flickr)

New Coke was introduced in April 1985, and within weeks they were receiving 5,000 angry calls a day. The number grew from there. Seventy-nine days after their initial announcement, Coca-Cola held a press conference in July 1985 to offer a mea culpa and announce the return of the original Coca-Cola “classic” formula.

Will Zuckerberg Relent?

So far, Facebook, I mean Meta, still wants to identify as a metaverse company, despite there being very few metaverse customers. The company is making sure users have accessories available and just unveiled a new virtual reality headset selling for $1,500 called the Meta Quest Pro. Zuckerberg says lower priced, presumably not “pro,” will follow ($300-$500 zone).

When one has built a business from a college dorm, a garage, or their mother’s basement, and it attains the kind of growth that Facebook, Apple, Amazon, or others have, it’s hard to keep growing at the pace investors and other onlookers have become accustomed to. This leads to a scenario where investors are exposed to a risk best described as the bigger they are, the farther they have to fall.  

And Facebook has fallen, not just in dollar value, but in ranking among its peers. Does this mean Zuckerberg is not right? The game isn’t over, and there aren’t many of us that can say, with honesty, that we are more forward-looking or have more luck than Zuck.

Is Michael Burry Right?

There is a whole universe of stocks beyond metaverse investments. Huge successful companies like Facebook or even Coca-Cola have ample resources to build and grow but lose nimbleness and growth potential, unlike the potential smaller companies enjoy. Huge companies are also more likely to have a “say yes to the boss, and you’ll be rewarded” culture, rather than a small company culture which is more “show the boss you can make them money, and you’ll be rewarded” culture.

Zuckerberg and Meta may very well be moving forward with a mistake that could be enshrined in textbooks years from now. However, like Coke, they may find that if it’s a lemon, they can make lemonade. Coca-Cola emerged from the brief departure from their main product strengthened as consumers discovered what life was like without their favorite soft drink.

Take Away

Michael Burry is worth paying attention to. He thinks differently and has been correct enough to always listen. The metaverse is new; does this mean it won’t grow and become something only a visionary like Mark Zuckerberg can imagine? It has been an expensive and slow start. I suspect Facebook was much less expensive to get off the ground, and adoption also required ancillary products to be useable by the masses.

A lesson investors should remember from this is how difficult it is for large companies to grow from their current offerings and huge corporate base.

Channelchek is a platform created to help investors uncover the next Apple, the next Moderna, or the next Facebook. It’s a resource to dig deeper into these less celebrated fledgling opportunities and to leave investors with enough understanding to decide whether they should take their own action by buying stock and becoming an owner of something with greater than average potential.

Paul Hoffman

Managing Editor, Channelchek  

Sources

https://www.history.com/news/why-coca-cola-new-coke-flopped

https://www.thestreet.com/technology/big-short-burry-says-facebook-and-zuckerberg-are-in-big-trouble

https://www.nytimes.com/2022/10/09/technology/meta-zuckerberg-metaverse.html