Michael Burry, who predicted the 2008 financial crisis, is bullish on China

August 21, 2024
By FGT

Recent 13F filings show Michael Burry increased his holdings of Chinese tech stocks.

As shown in Michael Burry’s Q2 2024 13F filings, Michael Burry has increased his investment in Chinese tech stocks. Overall, the Chinese tech stocks Alibaba (BABA), Baidu (BIDU) and JD.com (JD) represent nearly 46% of Burry’s portfolio, up from 22.3% of his portfolio at the end of Q1. Although Burry sold almost 1/3 of his shares in JD.com, he increased his stake in Alibaba by 30k shares (a 24% increase) and increased his stake in Baidu by 35k shares (an 87% increase).

Since Burry rarely gives public interviews it’s hard to know Burry’s thinking, however the extreme undervaluation of Chinese tech stocks relative to US tech stocks may be one of the key factors. Note that other Gurus have not nessearialy been positive on China, such as former Bridgewater CIO Rebecca Patterson, who said she sees a risk that the Chinese consumer is softening.

Michael Burry sold out of his gold position

To the surprise of many observers, Michael Burry sold all of his holdings of Sprott Physical gold trust (PHYS). Sprott physical Gold trust is an ETF backed by physical gold that closely tracks the spot price of gold.

Gold is generally considered a hedge against inflation, and investors hold gold to hedge against the falling value of fiat currencies. Burry’s Q1 gold purchase was hailed by many on social media that Burry saw risks to inflation and was therefore buying gold. However, inflation has cooled since the beginning of the year and now shows its lowest growth since 2021 at 2.9%. Burry may expect inflation to continue cooling as the economy slows.

However, recently the run up in the price of gold has been attributed to chinese buyers, as the weakening chinese economy and lack of investment alternatives has driven Chinese consumers to buy gold as a hedge. However, Michael Burry’s sale of Gold may indicate he is no longer bearish on the Chinese consumer. A stronger Chinese economy could dissuade Chinese consumers from buying gold, blunting the recent run up in gold prices.

Burry’s other portfolio positions indicate he is bullish on the economy

Michael Burry also made large additions to his portfolio in 3 US based stocks: Shift4 Payments (FOUR), Molina Healthcare (MCH) and Hudson Pacific Partners (HPP). While it is impossible to know why Burry made these portfolio additions, they show Burry is not afraid to add significant positions in the US.

Shift4 Payments is a payment processing company serving 200k businesses in retail, hospitality, leisure and the restaurant industries. This investment seems to be bullish play on the US consumer, however it could also be driven by the companies fundamentals.

Molina Healthcare provides healthcare to low-income families and recipients of medicare and medicaid. This could partly be a play on election year politics, but could also indicate Burry expects more consumers to be recipients of medicare and medicare.

Hudson Pacific partners is a REIT focused on West Coast tech offices – anchor tenants include Netflix, Uber and Square. This positions seems to indicate Burry is somewhat bullish on US tech hiring, however this REIT is down more than 49% YTD and may reflect Burry’s Mantra “I try to buy share of unpopular companies when they look like road kill and then sell them when they’ve been polished up a bit.”

Whatever Burry’s reasons, he does not appear to be outright bearish on the US or Chinese economies, and has not put any large put positions into place as he did in 2023.