Michael Burry

My positioning with my investors was always, I need three to five years
I didn’t offer transparency. I provided one quarterly report in letter form. That was all you got. I basically demanded that if you’re going to invest in my fund you need to accept my terms
I had begun to worry about the housing market back in 2003, when lenders first resurrected interest-only mortgages, loosening their credit standards to generate a greater volume of loans. Throughout 2004, I had watched as these mortgages were offered to more and more subprime borrowers – those with the weakest credit
A Scion portfolio will be a concentrated portfolio. The Fund maintains a high degree of concentration – typically 15-25 stocks, or even less. Some or all of these stocks may be relatively illiquid. I like to hold 12 to 18 stocks diversified among various depressed industries, and tend to be fully invested
How do I determine the discount? I usually focus on free cash flow and enterprise value (market capitalization less cash plus debt). I will screen through large numbers of companies by looking at the enterprise value/EBITDA ratio, though the ratio I am willing to accept tends to vary with the industry and its position in the economic cycle. If a stock passes this loose screen, I’ll then look harder to determine a more specific price and value for the company. I also invest in rare birds — asset plays and, to a lesser extent, arbitrage opportunities and companies selling at less than two-thirds of net value (net working capital less liabilities). I’ll happily mix in the types of companies favored by Warren Buffett — those with a sustainable competitive advantage, as demonstrated by longstanding and stable high returns on invested capital — if they become available at good prices
My weapon of choice as a stock picker is research; it’s critical for me to understand a company’s value before laying down a dime. I really had no choice in this matter, for when I first happened upon the writings of Benjamin Graham, I felt as if I was born to play the role of value investor. Investors in the habit of overturning the most stones will find the most success. The late 90s almost forced me to identify myself as a value investor, because I thought what everybody else was doing was insane
All my stock picking is 100% based on the concept of a margin of safety, as introduced to the world in the book “Security Analysis,” which Graham co-authored with David Dodd. By now I have my own version of their techniques, but the net is that I want to protect my downside to prevent permanent loss of capital. Specific, known catalysts are not necessary. Sheer, outrageous value is enough
I try to buy shares of unpopular companies when they look like road kill, and sell them when they’ve been polished up a bit. Fully aware that wonderful businesses make wonderful investments only at wonderful prices, I will continue to seek out the bargains amid the refuse
I prefer to look at specific investments within the inefficient parts of the market. The bulk of opportunities remain in undervalued, smaller, more illiquid situations that often represent average or slightly above-average businesses
Volatility does not determine risk. I certainly view volatility as my friend. Volatility is on sale because 99% of the institutions out there are doing their best to avoid it. I will always choose the dollar bill carrying a wildly fluctuating discount rather than the dollar bill selling for a quite stable premium
If you are going to be a great investor, you have to fit the style to who you are
At one point, I recognized that Warren Buffett, though he had every advantage in learning from Ben Graham, did not copy Ben Graham but, rather, set out on his own path and ran money his way, by his own rules… I also immediately internalized the idea that no school could teach someone how to be a great investor
I think a lot of hedge funds get their trades from Wall Street and get their ideas from Wall Street. And I just like to find my own ideas. I’m reading a lot; I read a lot of news. I’m addicted to it. I basically – I follow my nose on news stories
My natural state is an outsider. I’ve always felt outside the group, and I’ve always been analyzing the group
Common hedging techniques include shorting stocks, buying put options, writing call options, and various types of leverage and paired transactions. While I do reserve the right to use these tools if and when appropriate, my firm opinion is that the best hedge is buying an appropriately safe and cheap stock
In June 2005, mortgage rates were at 40-year lows, and risk premiums on mortgage securities were at all-time lows. Once the banks migrated to the subprime area, there was little else that could be done to send housing prices higher
Subprime mortgages, typically defined as those issued to borrowers with low credit scores, make up roughly the riskiest one-third of all mortgages
Regardless of what the future holds, intelligent investment in common stocks offer a solid route for a reasonable return on investment going forward
In essence, the stock market represents three separate categories of business. They are, adjusted for inflation, those with shrinking intrinsic value, those with approximately stable intrinsic value, and those with steadily growing intrinsic value
The idea that growth will remedy our debts is so addictive for politicians, but the citizens end up paying the price

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