Short Seller from "The Big Short" Has Liquidated All Holdings, Now Exclusively Bets on a Single Stock
Going Against the Grain: Michael Burry's Unorthodox Moves
Michael Burry, the legendary investor who made a killing betting against the housing market before the 2008 financial crisis, continues to defy the norm with his latest moves. At 51, this contrarian thinkser, who's the brain behind Scion Asset Management, seems less than optimistic about the markets. His recent portfolio disclosure suggests he's offloaded all his stocks, save for one - Geo Group, a company specializing in private prisons and psychiatric facilities.
On August 15, the day of his 13F disclosure, Geo Group's stocks shot up nearly 18% to $7.88, marking a six-month high. Prior to this, Burry's portfolio was quite diverse, including tech giants like Alphabet, Meta, Stellantis, pharmaceuticals such as Bristol-Myers Squibb, and health insurer Cigna. Geo Group made its way into his portfolio only in the second quarter, indicating a significant shift in his investment strategy.
This isn't unfamiliar territory for Burry, who's renowned for such bold moves. In fact, he slashed his portfolio down from 20 positions to just six within three months by the end of 2021, as reported by Yahoo Finance.
Digging Deeper: The Geo Group's Appeal
While Burry's specific reasons for favoring Geo Group remain elusive, there are compelling reasons to support his pick. Sector stability and growth potential coupled with Geo Group's competitive positioning make it an attractive option for contrarian investors. Here's why:
- Sector dynamics: Geo Group operates in correctional facilities, electronic monitoring, and reentry services, sectors that generally weather economic downturns due to government contracts and recidivism challenges.
- Valuation metrics: Although Geo Group's P/E ratio of 139.6x is significantly higher than peers and the sector average, its upside potential based on analyst targets is a robust 54.3%.
- Competitive positioning: Geo Group's price-to-sales ratio of 1.7x is closer to sector norms, implying reasonable revenue valuation compared to peers like CoreCivic at 1.2x.
A Closer Look: Geo Group vs. CoreCivic
| Metric | GEO | CXW ||------------|------------------|------------------|| P/E Ratio | 139.6x | 34.4x || Upside | 54.3% | 28.9% || Price/Book| 3.1x | 1.6x |
While CoreCivic offers a lower P/E, Geo Group's higher upside projection and price-to-book ratio might indicate Burry's faith in its asset quality or growth potential. However, definitive conclusions about Burry's strategy must be drawn with caution, as the available data doesn't offer a definitive account.
In a nutshell, Burry's bet on Geo Group may reflect a bullish stance on the essential nature of correctional services or a broader macroeconomic hedge. However, the specifics of his investment thesis remain speculative based on the available data.
Michael Burry, known for his unorthodox moves, has moved away from his diverse portfolio and invested in Geo Group, a company specializing in private prisons and psychiatric facilities, leaving only this company in his portfolio. On August 15, Geo Group's stocks surged nearly 18% to $7.88, marking a six-month high, after Burry's 13F disclosure. Burry's choice of Geo Group, despite its high P/E ratio, could be due to the company's sector stability, competitive positioning, and robust upside potential as compared to peers like CoreCivic.
