Market bulls have been running victory laps this year, as they've pushed the broad market SPDR S&P 500 ETF Trust SPY more than 16% higher through the first half of 2023.
Outside of that, ETF stalwarts like the Invesco QQQ Trust Series 1 QQQ went 20% higher and the tech stocks that live in them — namely Nvidia Corp NVDA — gained as much as 187% in the same time frame.
But not everyone is a market bull and it looks like famed "The Big Short" investor Michael Burry isn't one of them.
What Happened: Burry’s Scion Capital hedge fund took a bearish stance on both the broader market and the tech sector in the second quarter, with sizable puts on S&P 500 and the QQQ. His move reflected an inclination that perhaps the markets are topping out, and could face a downturn.
Burry opened 20,000 put options on the SPY at roughly $2.25 per contract, and 20,000 put options on the QQQ at roughly $2.70 per contract.
For the uninitiated, the bearish QQQ trade means Burry is expecting the AI fervor of this year to run out of steam, which would deflate some of the gains we've seen the SPY post during the same time frame.
Essentially, it’s a warning to tech bulls.
Among his fresh equity holdings, there’s a mix of sectors: from entertainment with Warner Bros Discovery Inc WBD and iHeartMedia Inc IHRT, to e-commerce with the RealReal Inc REAL, and even transportation with Star Bulk Carriers Corp SBLK.
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Burry also has a renewed focus on energy with holdings like Crescent Energy Co CRGY and NexTier Oilfield Solutions NEX.
As the market is cyclical in nature, the trades suggest Burry is attempting to front-run a move out of tech and into entertainment and energy.
A Pivot From Last Quarter’s Bets: In the last quarter, Burry’s pivot towards the banking sector caught investor attention, especially amidst the then-regional banking crisis. Despite the risks, Burry saw value in the likes of First Republic Bank and New York Community Bancorp NYCB.
However, the fresh 13F indicates an exit from all of the bank trades the investor took last quarter, with the exception of New York Community Bancorp.
The Market’s Current Stance: While Burry’s bearish bets stand out, the broader markets remain bullish. The S&P 500 gained over 19% this year, while the tech-centric Nasdaq Composite surged 44%, reflecting investor optimism toward tech stocks and artificial intelligence, even with looming regulatory challenges.
Burry’s portfolio shifts provide a cautionary tale — while the market rides on optimism, seasoned investors like himself are hedging against potential downturns.
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