Michael Burry Has Bought This Stock, So Am I
Trading below replacement value, a refinanced balance sheet, hidden growth business with zero competition, significant barriers to entry and >50% operating margins.
As a young investor I would spend hours studying the greatest investors to ever live. I poured through Warren Buffett biographies. Learned the strategy Buffett employed to generate massive returns for his investors early in his career. I studied Ben Graham and the value investing principals that have led many other investors down a successful path. I read Seth Klarman’s, Margin of Safety, and his adjoining shareholder letters like a detective looking for hints into the world of high finance and what really works on Wall Street.
Learning from the greatest value investors in the world has provided a countless amount intangible dividends that cannot be quantified. Spending my formative years studying what works on Wall Street from legends has led me down the successful path of value investing and continues to fire charge my interest in the space to this day.
I don’t spend much time these days reading biographies on investing legends like I used to in my formative years. My time these days are spent reading about actual businesses and trying to figure out what price I want to pay for the entire enterprise. A mentor of mine once said, “once you understand the basic principles of value investing the biggest ROI on your time will be reading about actual companies and finding investments off the beaten path.” The one who turns over the most rocks, generates the best returns at the end of the day.
That being said, I still follow a handful of investors that I respect in the public space. Most of them are friends I have met throughout the years. They tell me their best investing ideas and I’ll dig in. I follow them on public forums where they pitch the stock, they like the most. Listen to them at conferences speaking in front of an audience and telling everyone why this company is so undervalued. I follow their 13Gs and any public noise they make in the market.
One investor I follow extremely close is Michael Burry as his value investing strategy is similar to mine. He is a great investor and tend to look at companies off the beaten path.
Back in the day Burry wrote a value investing blog while going to medical school. Legendary investor Joel Greenblatt followed the blog and encouraged Burry to start a hedge fund. The blog is no longer around but someone put together a DropBox of his prior writeups.
The writeups are incredible and if you pour through them, you can see the value investing strategy that Burry uses to outperform the market. Burry invests in obscure companies trading at a meaningful discount to fair value.
Check out a portion of this writeup he wrote back in the day as an example.
I wanted to spend the rest of the day highlighting a stock that Michael Burry owns and the reason why he owns it. I’ve followed this company for years given the one-of-a-kind owned real estate, high barriers to entry, government contracts and hidden growth business with almost zero competition. The business is dirty, not ESG friendly and there is a ton of debt on the balance sheet — which gives value investors not worried about investing in ESG friendly companies — an opportunity to invest in a company trading meaningfully below tangible replacement value.
This company has rallied significantly from the all-time lows once seen a year ago and has subsquently fallen back down to basement level valuations. Despite the move in the stock price, the valuation is still compelling and trades at a meaningful discount to fair value. Debt has been refinanced. Assets have been sold. And the hidden growth business is firing on all cylinders with 50% operating margins. I’m bullish on the company and own it. As Michael Burry once famously wrote, research is his weapon of choice in the public markets. I’ve done a lot of research on this company and think the situation is compelling enough to write about it today. Let’s take a stab at the setup here.
Keep reading with a 7-day free trial
Subscribe to Trade Trackers to keep reading this post and get 7 days of free access to the full post archives.