Wisdom from Michael Burry
A one-pager featuring Michael Burry’s investing strategy is making the rounds on X (x.com). Sharing below the biggest takeaway summarized by valueinvestorda...:
- 📉 Find Unpopular Stocks: Look for companies in industries that are out of favor and undervalued.
- 💰 Focus on Free Cash Flow: Prioritize free cash flow and enterprise value over traditional metrics like P/E ratios.
- 🎯 No Need for Catalysts: Outrageous value is enough; don’t wait for a specific event to invest.
- 🛡️ Protect Your Downside: Invest with a margin of safety to avoid permanent capital loss.
- 🏗️ Diversify Strategically: Hold 12-18 stocks across depressed industries to reduce risk.
- 💰 Focus on Free Cash Flow: Prioritize free cash flow and enterprise value over traditional metrics like P/E ratios.
- 🎯 No Need for Catalysts: Outrageous value is enough; don’t wait for a specific event to invest.
- 🛡️ Protect Your Downside: Invest with a margin of safety to avoid permanent capital loss.
- 🏗️ Diversify Strategically: Hold 12-18 stocks across depressed industries to reduce risk.
- 🕒 Sell Early: Don’t hesitate to sell if a stock quickly gains 40-50%.
- 📊 Use Basic Technicals: Buy within 10-15% of 52-week lows showing support.
- 📦 No Size Limits: Invest in companies of all sizes—large-cap, small-cap, micro-cap, etc.
⚙️ Focus on Enterprise Value/EBITDA: Use this ratio, adjusted by industry, to screen for undervalued stocks.
- 🔄 High Turnover is OK: Portfolio turnover above 50% is acceptable. Don’t overthink taxes, just pay them.
- 🧮 Don’t Trust ROE: Return on equity (ROE) can be misleading—stick to more reliable metrics like cash flow.
- 💼 Minimal Debt Preferred: Stick with companies with easily managed debt loads.
- 🦅 Seek Rare Birds: Occasionally, you’ll find unique opportunities like arbitrage or asset plays.
- 📈 Don’t Fear Volatility: Volatility doesn’t equal risk, so don’t stress over short-term price swings.
- 🧘 Stay Fully Invested: Keep your money working even in tough market conditions.
- ❌ Cut Losses Quickly: Don’t let a bad stock drag down the portfolio—sell when it hits new lows. And perhaps the biggest takeaway of all is that he cuts losses at a maximum of 10-15% and takes profit at 40-50%. That’s a clear and straightforward 4-to-1 risk-to-reward ratio.
- 📊 Use Basic Technicals: Buy within 10-15% of 52-week lows showing support.
- 📦 No Size Limits: Invest in companies of all sizes—large-cap, small-cap, micro-cap, etc.
⚙️ Focus on Enterprise Value/EBITDA: Use this ratio, adjusted by industry, to screen for undervalued stocks.
- 🔄 High Turnover is OK: Portfolio turnover above 50% is acceptable. Don’t overthink taxes, just pay them.
- 🧮 Don’t Trust ROE: Return on equity (ROE) can be misleading—stick to more reliable metrics like cash flow.
- 💼 Minimal Debt Preferred: Stick with companies with easily managed debt loads.
- 🦅 Seek Rare Birds: Occasionally, you’ll find unique opportunities like arbitrage or asset plays.
- 📈 Don’t Fear Volatility: Volatility doesn’t equal risk, so don’t stress over short-term price swings.
- 🧘 Stay Fully Invested: Keep your money working even in tough market conditions.
- ❌ Cut Losses Quickly: Don’t let a bad stock drag down the portfolio—sell when it hits new lows. And perhaps the biggest takeaway of all is that he cuts losses at a maximum of 10-15% and takes profit at 40-50%. That’s a clear and straightforward 4-to-1 risk-to-reward ratio.
45% of his portfolio is in just three Chinese tech stocks—Alibaba (BABA), Baidu (BIDU), and JD.com (JD). His strategy is now paying off, with those names up 21-54% since he entered.
Which of his strategy resonates with you most? For me it will be to focus on Free Cash Flow, diversification and to buy undervalued stocks with margin of safety.
Meanwhile, My China ETF $Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR.US)$ has gained about 30% profit now. Will the bull continue to run after China market reopen tomorrow post the long holidays?![]()
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
Read more
Comment
Sign in to post a comment
I Am 102927471 :