👀 Michael Burry is Shorting the Market (Again)

And.. Walmart vs. Target

August 20, 2023

TOP STORY
Michael Burry’s $1.6 Billion Bet Against the Stock Market 🤯

Michael Burry, renowned for his depiction in the "The Big Short," and prediction leading up to the 2008 financial crisis, has placed a bet against the S&P 500 and Nasdaq 100 indices, purchasing a staggering $1.6 billion in put options. Put options increase in value if the index falls, so this means he betting heavily against the market

This bet can be seen in recent 13F filings, quarterly reports required by the Securities and Exchange Commission (SEC) from institutional investment managers with over $100 million in qualifying assets.

In addition to his short position against the market, Michael Burry has been actively reshuffling his portfolio:

  • Sold completely out of Chinese stocks, JD.com ($JD) and Alibaba ($BABA).

  • Sold completely out of U.S. regional banks, PacWest Bancorp ($PACW) and First Republic Bank ($FRCB).

  • Added new positions in Expedia ($EXPE), CVS ($CVS), MGM Resorts ($MGM), and Warner Bros. Discovery ($WBD).

  • Added to his positions in RealReal ($REAL), Geo Group ($GEO), and Cigna Group ($CI).

SUPERINVESTORS
👀 What Other Superinvestors Are Buying & Selling

Apart from the eye-catching moves by Michael Burry, the latest 13F filings also shed light on other renowned investors.

The “Oracle of Omaha”, Warren Buffett, made several notable changes to Berkshire Hathaway’s portfolio, including the addition of 3 home-builders:

  • Buys: Capital One ($COF) and Occidental Petroleum ($OXY)

  • Sells: Activision Blizzard ($ATVI), Globe Life ($GL), General Motors ($GM), Celanese ($CE), and Chevron ($CVX).

  • New Positions: D.R. Horton ($DHI), Lennar ($LEN.B), and NVR ($NVR).

Mohnish Pabrai, a prominent investor who paid $650,000 to have lunch with Buffett in 2008, made serious changes to his portfolio —selling off all his previous holdings and reallocating 100% of the proceeds into two stocks:

  • Buys: Alpha Metallurgical Resources ($AMR) and Consol Energy ($CEIX)

  • Sells: Micron Technology ($BU), Brookfield Corp ($BN), and Seritage Growth Properties Holdings ($SRG).

Top 10 Buys in Q2 2023 (by Superinvestors)

  • Microsoft ($MSFT) - 9 buys

  • Amazon ($AMZN) - 8 buys

  • Visa ($V) - 8 buys

  • JPMorgan & Chase ($JPM) - 8 buys

  • Walt Disney ($DIS) - 8 buys

  • Taiwan Semiconductor ($TSM) - 7 buys

  • Alphabet ($GOOG) - 7 buys

  • Mastercard ($MA) - 7 buys

  • Wells Fargo ($WFC) - 7 buys

Top 10 Sells in Q2 2023 (by Superinvestors)

  • Alphabet ($GOOGL) - 19 sells

  • Microsoft (MSFT) - 19 sells

  • Meta ($META) - 17 sells

  • Alphabet ($GOOG) - 16 sells

  • Amazon ($AMZN) - 15 sells

  • Salesforce ($CRM) - 12 sells

  • Visa ($V) - 11 sells

  • Oracle ($ORCL) - 9 sells

  • United Health Group ($UNH) - 9 sells

  • Apple ($AAPL) - 9 sells

The sectors that attracted the most attention in terms of net buys included Financials, Industrials, and Real Estate.

On the flip side, Technology, Consumer Discretionary, and Healthcare sectors witnessed the most net sells, highlighting a shifting sentiment among these top investors.

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CONSUMER STAPLES
Target vs. Walmart, Two Retail Giants Report Earnings 🛒

As the recent earnings season winds down, two retail behemoths, Walmart and Target, posted Q2 results, painting a picture of the current retail landscape.

Target ($TGT) 🎯

Target reported a Q2 earnings beat with $1.80 per share, surpassing the expected $1.39. However, sales missed estimates, with the company reporting $24.77 billion against an anticipated $25.16 billion.

  • Revenue: $24.77 billion (vs. 25.16 billion expected) ❌

  • Earnings: $1.80 per share (vs. $1.39 expected) ✅

📉 Target lowered its full-year forecast, noting a struggle to persuade shoppers to expand their purchases beyond essentials.

The company now predicts a mid single-digit decline in comparable sales for the year and an EPS ranging from $7 to $8.

Sales Performance: The company witnessed weaker sales, with a backlash to its Pride month collection playing a role. CEO Brian Cornell indicated that sales improved in July but raised concerns about potential economic headwinds in the second half of the year, including inflation and the resumption of student loan payments.

Inventory and Profits: Target managed to raise its Q2 net income to $835 million, from $183 million a year earlier. This jump in profits was due to the company's measures to tackle unsold items, decreased markdowns, and other efficiencies.

Consumer Behavior: The retailer has been grappling with a shift in consumer behavior as shoppers focus more on essential items, particularly given the inflationary environment. Nevertheless, areas like beauty have seen growth, with Target's collaboration with Ulta Beauty proving fruitful.

📈 $TGT rose 7.7% after earnings but ended the week up ~4.4% post-earnings

Walmart ($WMT) 🛍️

Walmart reported better-than-expected results with an adjusted EPS of $1.84, versus the projected $1.71. Revenue stood at $161.63 billion, slightly surpassing the expected $160.27 billion.

  • Revenue: $160.28 billion (vs. 158.93 billion expected) ✅

  • Earnings: $1.84 per share (vs. $1.71 expected) ✅

📈 Walmart raised its full-year forecast, now anticipating a 4%- 4.5% rise in consolidated net sales and an EPS between $6.36 and $6.46.

E-commerce and Sales: Walmart's U.S. e-commerce sales surged by 24%. Moreover, the company witnessed a 6.4% growth in U.S. same-store sales, excluding fuel.

Consumer Behavior and Trends: While the retailer saw a resurgence in sales of big-ticket items, the focus remains largely on essentials amid inflationary concerns. Notably, Walmart's private label sales in the U.S. grocery department have increased by 9% YoY.

Inventory and Inflation: Inventory was down by 5% compared to last year, and the company has had fewer markdowns. Even though general merchandise sales remain below last year's figures, back-to-school sales have shown promise, indicating a potentially strong holiday season ahead.

📉 Despite the strong earnings, $WMT fell as low as 3.4% after earnings but ended the week doen ~1.9%

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🎙 Top Discussions This Week

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