Speaker 1: Anyone who has watched the movie The Big Short will know that Michael Burry is the king making money in a stock market crash, the 2008 financial crisis. Well, let’s just say he made a lot of money. Now, I don’t know if you guys have been paying close attention to what Barry has been doing or saying, but it has got US investors slightly concerned.
Let me update you. Barry said index fund inflows are now distorting prices for stocks and bonds in much the same way that CDO purchases did for subprime mortgages more than a decade ago. The flows were reversed at some point, he said, and that will be ugly when they do like most bubbles. The longer it goes on, the worse the crash will be. So as you would expect after reading Buhriz, comments on the markets that got me interested was Barry himself actually doing when it comes to his own investments, what I found was fascinating. I want to show you this. So this recent quarter in twenty twenty, Burri made 34 different stock moves. Now, some of those moves were minor. We’re going to look at is a bigger stock buys and his biggest stock sells basically all of the important ones. His largest stock sale was Jack in the Box ticker symbol Jaquet. That’s obviously the American fast food restaurants. And Burri got completely rid of that position. He sold all 300000 shares worth twelve point two, four percent of his portfolio, his next largest stock. So let’s just say Mark Zuckerberg would not be happy with. He got rid of all of his Facebook shares, which used to make up eleven point six, five percent of the portfolio. The three positions that Burri reduced and did not completely sell out of were one GameStop, where he sold eight point four four percent of his portfolio with to Kosovo nine point eleven percent and three Mexi Technologies, which was nine point four eight percent. So he reduced them by a lot, but he just hold on to a couple of shares as well. The last companies that he sold completely out of were Boeing as no real surprise there. Telebrands, a company which Jeremey from financial education used to love, and Michael’s company, the provider of arts and decor items. So there you have it. He sold almost 75 percent of his portfolio and he’s completely allocated it into other investments. It’s a move that a lot of stockholders would be afraid to make. But Buhriz never going to back down on what he thinks is right.
A lot of those companies sold were American retail or food companies, the likes of Michael’s Telebrands Game Stock and Jack in the Box. But he also wasn’t afraid to get rid of technology type companies like Google and Facebook, which does lead us on to a very obvious question that you should ask me. If he sold so much of his portfolio, what did he replace it with? And what I’m about to show you, I think you’re going to find a very interesting hour of his ten biggest stock buys. Seven of those were called options. Now, I don’t know if you guys understand what a call option is. I’d say probably 50 percent of you do. But for those who don’t know, let me explain. A call option gives the buyer the opportunity, but not the obligation to buy a certain stock at a fixed price. And of course, you have to pay a certain one off fee to be a holder of a stock call option. If a stock goes up, you profit from the call option. And if it goes down, well, you just lose out on the small fee that you pay. So Michael Burry, his biggest stock buy so far was a cool option. And the stock alphabet or Google, as it’s more well known, this means Burri paid a one off fee to be an owner and the call option and now he can buy Google at the original price he agreed upon. If Google goes up like it has done a lot over the past couple of months, Bernie makes a ton of money. If Google falls and there’s a massive market crash, wow. Berry just loses the small fee that he paid and he doesn’t have to buy the stock. Basically, what these call options do is that allows you to profit if the stock market continues its run up and it minimizes the downside to a massive expense. I think this call option purchases from Berry. It’s such a smart decision. Let’s take a look at them all. His biggest move by far was the purchase of Google stock, which he bought 80000 shares in accounting for thirty five point nine percent of the portfolio. Its total worth was one hundred and thirteen million dollars.
So if we take a look at Google stock ticker symbol GE, gee, what’s happened to it over the past six months? It’s absolutely shot up like a rocket. It’s almost up by 60 percent. So it already made a lot of money from this Google Purchase if this pattern continues and the stock keeps going up. Well, Burri will make a lot more money because he can exercise this cool option, which he bought at a much cheaper price. However, if there is a market crash and Google alphabet stock goes down, Burri doesn’t mind too much because he can choose to not exercise this call option. And the only thing he loses is the small fee he paid to buy it in the first place. This is the reason why I think Barry’s strategy is so smart in this particular market that we’re in because it minimizes the high potential downside risk that there is. Right. Let’s keep going through his other investments. His second largest investment was a call option in the stock Facebook. Now, that’s very interesting because those of you who have been paying attention will know that he sold his Facebook stock. So he specifically wants to own all options in the stock instead of buying the stock outright, because, as I’ve said, it minimizes their downside risk with each stock, its third largest buy as a call option and booking holdings here, he bought five point eighty six percent of his portfolio worth then Goldman Sachs, the bank, another call option, making up four point six percent of his portfolio. And Western Digital Corp. makes up his fifth largest by three point eight percent of the portfolio worth. So, guys, his top five largest investments were all call options. He did not choose to directly own the stock, but instead he wanted to minimize downside risk through those calls. That’s very interesting to me. OK, then, Bed, Bath and Beyond came in at number six in terms of size, discovery and trip. Dotcom were seven and eight and these ones were all stock buys. They were not called options. Number nine and 10 were call options. Both banks, Bank of America and JP Morgan rounding up his top 10 largest stock buys for the recent 2020 quarter. So I’ve got to be honest, guys, I’ve looked at a lot of different investors portfolios, and I got to say I haven’t seen anyone use this tactic before. I think it’s so smart to use call options. Let me show you why the market, whether you like it or not, has been on fire recently at the time of making this video. It’s gone up just over 50 percent in a matter of months. He sees this and he sees prices at all time highs. And he thinks, what sector can I use? Because I don’t want to miss out on these returns, but I also don’t want to lose a lot of money when if the market crashes. So what’s the most obvious decision? Of course, the tactic is call options, because if the market keeps going up like it has been doing, Burri exercises as call options and it becomes an owner and he receives those ridiculously high returns if the market crashes on itself, like a lot of investors predict, well, very simply doesn’t exercise as call options and he doesn’t lose a lot of money. The only thing he loses is the original one off fee that accustomed to buy the call options in the first place. Smart investing, I’ll just say that. But here’s something that I need to tell you. And it’s very important that you pay close attention to this.
Michael Burry does not have to disclose his short positions. He only has to disclose his stock buys and call options. So if you remember the big short movie where he puts a massive shorts on the housing market. Yeah, if he has a comparable position today, he legally does not have to disclose it and tell everyone. So that’s something we need to keep in mind going forward. Burri probably has a bunch of short positions right now that we don’t know about and we will never know unless he comes out and tells us directly, which I highly doubt he will do, that he’s going to keep his cards under the table and then maybe tell us after the fact. Nevertheless, we need to pay attention to what we do know. What we know right now is that Burri, first of all, he sold a lot of stocks, 75 percent of his portfolio he got rid of this quarter and then he went out and bought a ton of call options. This gives him the option of being a stockholder at a particular price, but it minimizes his downside dramatically in case of a crash. I’ve got to tell you, Barry is so calculated with his decisions, it’s all about risk and reward, minimizing risk, what call options due to a great extent, and maximizing potential reward, which Barry also has managed to achieve in this weird market that we’re in.
There is so much that we can learn from the way Barry is playing the game because we want to win no matter where the market goes. And Buhriz doing this with the way he’s organized his portfolio.