Burry Goes Long: Billionaire Investor Bets on Beaten-Down Stocks

Michael Burry, founder of Scion Asset Management and portrayed in the movie 'The Big Short', is taking a contrarian approach to investing. While Wall Street focuses on AI-driven stocks, he has been quietly accumulating call options in three underperforming companies: UnitedHealth (UNH), Regeneron (REGN), and Lululemon (LULU). According to his portfolio breakdown, these stocks make up nearly 53% of his holdings, with UNH being the largest position at 18.88%. Burry's thesis is that these companies have been unfairly beaten down by the market and are poised for a significant rebound.

UnitedHealth's recent Q2 report showed a 55% increase in consolidated operating earnings and an improved medical care ratio, which has led management to raise full-year adjusted EPS guidance. Regeneron's Q2 was also impressive, with non-GAAP EPS of $14.29 and revenue up 16.7%. The company's Dupixent treatment reached $6 billion in global net sales, while EYLEA HD U.S. sales grew 52%. Lululemon, on the other hand, has seen a significant decline in sales but Burry sees it as a deep-value bet due to its substantial cash reserves and high returns on capital.

Burry's strategy is to take advantage of call options, which provide leveraged upside with defined downside. He believes that these companies will snap back hard once the market realizes their true value. However, timing is crucial, as calls decay over time. Key catalysts for Burry's bets include UnitedHealth's Q3 earnings report, Regeneron's November FDA decision on simdesiran, and Lululemon's holiday comps under new leadership.