Dr. Michael Burry rose to fame for bets he made against the housing market, leading up to the Great Recession, when he purchased credit default swaps on mortgage bonds that paid out big. These events were portrayed in the movie The Big Short in which Oscar-winner Christian Bale portrayed Burry in the critically acclaimed film directed by Adam McKay.
Needless to say, Burry, who runs Scion Asset Management, turned heads again earlier this year when filings showed that the fund sold nearly its entire portfolio in the first quarter of the year. Burry also bought put options on large tech and artificial intelligence (AI) stocks like Nvidia. Those moves proved to be prescient because the stock market got absolutely crushed in early April due to President Donald Trump's "Liberation Day," although it has since rebounded.
Scion's second quarter 13F filing showed that Burry was a big buyer of stocks in Q2 and seems to have turned bullish. Notably, Burry went long on two stocks that investors have seemingly left for dead and that were down at least 40% this year.
Image source: Getty Images.
UnitedHealth: Hedge funds to the rescue
UnitedHealth (UNH 1.24%), the largest healthcare insurer in the U.S., has had a tough year. Even after a strong recovery recently, the stock is still down close to 41% this year (as of Aug. 20). Sectorwide trends, including higher utilization, high prescription costs, and an older population, resulted in management severely underestimating the company's medical costs in 2025, which are now projected to come in $6.5 billion higher than expected.
This has crippled expected adjusted earnings this year, with management now guiding for $16 adjusted earnings per share (EPS) in 2025, down from an initial guide of $29.50 to $30 at the beginning of the year . Additionally, the U.S. Department of Justice (DOJ) is investigating United for its billing practices associated with Medicare Advantage, the private healthcare program that is reimbursed by the government.
With the stock crushed, hedge funds including Scion swooped in to scoop up shares in Q2. Burry added about 20,000 shares and also purchased 350,000 shares through long call options, which are essentially bets that a stock will rise to or above a certain price by a certain date. Other notable billionaires who bought the dip include Berkshire Hathaway's Warren Buffett and Appaloosa Management's David Tepper.
While United certainly has its work cut out, being the largest healthcare insurer in the U.S. still gives the company significant pricing power. Financially speaking, UnitedHealth is still doing OK. The company is generating enough earnings from operations to handle its debt payments and still had a free-cash-flow yield over 9% in the past 12 months. The company also has a dividend yield close to 3% to compensate investors for their time. Burry and others are betting United can navigate the choppy waters in the near term and then get back to their strong performance long term.
LuLulemon: Struggling with multiple headwinds
The luxury exercise and apparel brand Lululemon (LULU 4.76%) has seen its stock get absolutely crushed this year and is down close to 47%. Lululemon has been dealing with numerous headwinds, including rising competition, tariffs, a more cautious consumer less willing to shell out for luxury clothes, and a bit of a slowdown in the exercise space as tailwinds from the COVID-19 pandemic have died down.
But that didn't stop Burry and Scion from purchasing 50,000 shares of the stock in Q2 and 400,000 total shares through long call options. Lulu's performance hasn't necessarily been bad. In the company's first fiscal quarter of 2025 ending May 4, the company reported EPS and revenue both ahead of Wall Street estimates and up on a year-over-year basis.
However, management also lowered its full-year EPS guidance to a range of $14.58 to $14.78, down from a range of $14.95 to $15.15 and below what analysts had expected, citing a "dynamic macroenvironment." Lulu's CEO Calvin McDonald also said the company "intends to leverage our strong financial position and competitive advantages to play offense, while we continue to invest in the growth opportunities in front of us."
The company has $1.3 billion of cash and equivalents and no debt on its balance sheet, and is also planning some modest price increases to mitigate some of the impacts of tariffs. With the stock now trading around 13.5 times forward earnings, Burry is probably thinking that most of the challenges are priced into the stock, and that the firm's strong balance sheet and brand can weather near-term challenges, with a good long-term opportunity ahead.
