How to Invest Like Michael Burry

When it comes to investing success stories, Michael Burry is hard to top. Originally just dabbling in investing while in medical school, Burry was successful enough with his stock picks to get the attention of companies like Vanguard.

Then he shorted the housing market, made $100 million, and was one of the main characters in an Oscar-winning movie -- not bad for what started out as a hobby. And if you watched The Big Short, you may have wondered just what it would take to invest like Burry. While that's no easy feat, we can look at Michael Burry's portfolio and what makes his investing approach unique.

Who is Michael Burry?

Who is Michael Burry?

Michael Burry is an investor and hedge fund manager. In college, he studied economics and medicine, graduating from Vanderbilt University School of Medicine. He's a licensed (but not practicing) physician.

While in medical school, Burry invested in stocks and discussed his picks on the Silicone Investor website. He developed a good reputation due to his successful stock picks and decided to start his own hedge fund, Scion Capital, in 2000. Scion Capital outperformed the S&P 500 every year from 2001 through 2004 and grew to $600 million in assets under management.

Burry was one of the first investors to predict the subprime mortgage crisis, and he decided to short the U.S. housing market in 2005. Although it was an unpopular decision among his investors at the time, it eventually paid off to the tune of $100 million for Burry and $725 million for his remaining investors.

Due to his bet against the housing market, Burry was one of the principal players in the book and later movie covering the housing crisis, The Big Short. In the film, Burry was played by Christian Bale. Burry shut down Scion Capital in 2008, but he reopened it as Scion Asset Management in 2013.

Michael Burry's Personal Stats

Michael Burry's Personal Stats

• Age: 52 years.
• Source of wealth: Hedge fund management.
• Marital status: Married.
• Residence: Saratoga, California.
• Children: Two sons.
• Education: University of California, Los Angeles (BA); Vanderbilt University (MD).

Michael Burry's investment approach

Michael Burry's investment approach

Michael Burry is a value investor who developed his investing style based on the book Security Analysis by Benjamin Graham and David Dodd. The key component of Burry's investments is a margin of safety. In fact, he has said that "All my stock picking is 100% based on the concept of a margin of safety."

A margin of safety is a difference between a company's stock price and its intrinsic value. The idea is that if a company is worth more than its current stock price, then it's a safe investment because the price will eventually rise to match its value.

While many investors follow a value investing strategy, there are several unique elements of Burry's approach that have helped him be so successful. Here's what makes Burry's way of investing different:

• He looks for value anywhere and everywhere. He has said, "If I can find value in it, it becomes a candidate for the portfolio." His most famous investment wasn't a stock at all, but the credit default swaps he used to short the housing market.
• He doesn't let outside influences and market sentiment affect his decision making. Burry bases his investments on his technical analysis and isn't afraid to take a contrarian viewpoint.
• He often invests in out-of-favor sectors of the market. He believes that this allows investors to buy in to quality companies when irrational selling is at its peak.

Burry also tends to be selective about his investments. At the end of 2022, Scion Asset Management held only nine stocks. That fits Burry's style, as he prefers to make every investment count with a portfolio of good value stocks that all have a margin of safety. He doesn't invest in a large number of companies with hopes that a few big winners will balance out the losers.

Michael Burry's investments

Michael Burry's investments

Here are the top investments Michael Burry manages through his hedge fund, Scion Asset Management, as of March 31, 2023:

More from Michael Burry

More from Michael Burry

In recent years, Michael Burry has been most active on his Twitter account, @michaeljburry. However, he frequently tweets and deletes, and he has also deleted his account in the past. Another Twitter account, @BurryArchive, keeps a record of Burry's tweets and account activity.

If you're interested in learning more about Burry, you may want to read The Big Short: Inside the Doomsday Machine by Michael Lewis. While it's not strictly about Burry, it has quite a bit of information on him.

On the subject of books, Burry shared a picture of his bookshelf in 2022. For those interested in reading what Burry reads, here are the books he had:

• Securities Analysis by Benjamin Graham and David Dodd.
• You Can Be a Stock Market Genius by Joel Greenblatt.
• Buffett: The Making of an American Capitalist by Roger Lowenstein.
• When Genius Failed by Roger Lowenstein.
• All the Devils Are Here by Bethany McLean and Joe Nocera.
• Atlas Shrugged by Ayn Rand.
• Collateralized Debt Obligations & Structured Finance by Janet Tavakoli.
• Credit Derivatives by Janet Tavakoli.
• Structured Credit Products by Moorad Choudhry.
• Where Keynes Went Wrong by Hunter Lewis.
• Financial Warnings by Charles Mulford.

In addition, Burry had three collections of annual shareholder letters written by famous investor Warren Buffett. His books included Buffett's letters from 1957 to 1970, 1977 to 1990, and 1991 to 2001.

Related investing topics

What we can learn about investing from Michael Burry

What we can learn about investing from Michael Burry

The general idea behind Michael Burry's investments is simple enough, but replicating what he does is much more complicated. He's known for doing a substantial amount of research, and he clearly has a sharp analytical mind, two factors that have been key to his success.

That being said, there are plenty of lessons to take about how to invest from Burry's success. Here are the most important ones:

• Aim for quality, not quantity, with your investments. It's better to heavily research and make a small number of investments you're confident in rather than a large number of bets you're unsure about.
• Don't be afraid to look outside the box. Burry has said he'll invest anywhere he can find value. Small-cap stocks, international markets, and distressed industries are all examples of good places to look for these opportunities.
• Be willing to hold your investments even during periods of volatility. If you've done your research and you believe you've made a sound investment, don't let short-term volatility or other outside factors convince you to abandon ship.