Big Short Legend Michael Burry Doubles Lululemon Stake and Buys Three New Stocks in Bold Q3 Moves

Legendary investor Michael Burry, famed for his prescient bets against the housing bubble in 2008 that netted him an estimated $700 million (£533.4 million), has once again made bold moves in the market. Known for his contrarian approach and exceptional foresight, Burry's latest activity suggests a cautious yet opportunistic stance as he navigates a volatile economic landscape.

Burry's saga was famously chronicled in the award-winning film The Big Short, which depicted his successful bet against the US housing market before the crash. Since then, the founder of Scion Asset Management has gained a reputation for unconventional trades—buying water assets amid predicted future scarcity and investing in meme stocks like GameStop before they surged.

He has also wagered against high-profile stocks and ETFs, including Elon Musk's Tesla (Nasdaq:TSLA), Cathie Wood's Ark Innovation ETF, and BlackRock's iShares Semiconductor ETF. These moves demonstrate Burry's willingness to challenge market consensus and seek value where others may overlook it.

Scion's Major Increase in Lululemon

In a surprising move, Burry's hedge fund increased its stake in struggling apparel retailer Lululemon Athletica (Nasdaq:LULU) by 100% in Q3. According to the latest 13F filing with the U.S. Securities and Exchange Commission, Scion acquired 50,000 shares worth approximately $10.3 million (£7.8 million) at an average price of $207.76 (£158.3) per share.

Lululemon's stock has tumbled 56.7% so far this year. Analysts forecast a 22.6% decline in quarterly earnings, with full-year profits expected to drop by 11.8%. Despite the challenges, the company's recent collaboration with the NFL could open new growth avenues in a difficult domestic market. Additionally, Lululemon reported a 25% rise in revenue from China, highlighting potential growth outside the US.

However, the consensus among analysts remains cautious. Of 25 surveyed by TipRanks, 22 have a 'Hold' rating, two recommend a 'Buy,' and one suggests a 'Sell.' The average 12-month target price stands at $195 (£148.6), indicating potential upside of over 17.8% from current levels.

Burry Adds Three New Stocks to His Portfolio

In Q3, Burry's Scion Asset Management also bought significant stakes in three other companies:

• Molina Healthcare (NYSE:MOH): 125,000 shares purchased for $23.9 million (£18.2 million).
• Sallie Mae (Nasdaq:SLM): 480,054 shares for $13.2 million (£10 million).
• Bruker Corporation (Nasdaq:BRKRP): 48,334 shares of 6.375% Mandatory Convertible Preferred Stock for $13.1 million (£9.9 million).

While Bruker's preferred shares have gained 23.1% so far this year, Molina and SLM have significantly underperformed the broader market. Burry's investment choices suggest a tilt towards healthcare and scientific sectors, perhaps betting on long-term growth despite short-term volatility.

Major Portfolio Exits

Burry also divested from several major holdings, including UnitedHealth Group (NYSE:UNH), Estée Lauder (NYSE:EL), MercadoLibre (Nasdaq:MELI), and Regeneron Pharmaceuticals (Nasdaq:REGN). These sales, mostly held for just a quarter, yielded profits ranging from 1.5% to 18.2%, indicating a strategic rotation.

Cryptic Warning After Silence

After more than two years of silence, Burry issued a rare warning on social media platform X, cautioning about a potential market bubble linked to the rapid rise of AI.

'Sometimes, we see bubbles. Sometimes, there is something to do about it. Sometimes, the only winning move is not to play,' he wrote.

His post echoes the famous line from the 1983 film WarGames, where an AI concludes that the only way to win a nuclear war is not to play at all: 'A strange game. The only winning move is not to play.'

A Cautiously Optimistic Yet Skeptical Approach

Burry's recent moves reflect a keen eye for value amid turbulent markets. His increased stake in Lululemon shows confidence in the company's long-term prospects despite current headwinds, while his diversification into healthcare and scientific instruments suggests a strategic hedge against potential downturns.

His cryptic warning about a possible bubble highlights ongoing concerns about overvaluation, especially in sectors driven by technological hype like AI. As always, Burry's actions serve as a reminder that the contrarian investor remains vigilant, sceptical of the herd, and ready to act when opportunities—or risks—arise.

Disclaimer: Our digital media content is for informational purposes only and not investment advice. Please conduct your own analysis or seek professional advice before investing. Remember, investments are subject to market risks and past performance doesn't indicate future returns.