'Big Short' investor Michael Burry warns of a massive bubble and epic market crash

[opmi]

Thanks!

Friend was pointing out to me that Tepper was like aggressively reducing...
https://www.dataroma.com/m/holdings.php?m=AM

Following 13F is like copying classmates' homework. Must copy intelligently and learn...haha...
It is a great source of idea generation.

[karlmarx]

About ten years ago when I just started, WB bought a significant stake in BYD at a 12ish P/E, IIRC.

I thought to myself, maybe I should buy this. But BYD doesn't look cheap at all according to traditional metrics; certainly not like his oft-quoted See's Candies purchase at 6ish P/E.

Turns out WB was right about BYD, and I should have "copied his homework." Of course, WB often espouse buying "things you understand," which also means don't coat tail (which I take to mean follow blindly). Till today, for better or worse, I have yet to coat tail anyone else.

But I guess if there is someone I would choose to "copy," no doubt I will copy from WB. Looking back, just dumping my money into BRK would have provided me with very good returns, and also freed my time for other pursuits.

[Wildreamz]

One must be careful when blinding copying homework (he also invested in many duds like Tesco, IBM, Kraft-Heinz etc.). Like what he said, if you trust his judgement, you should just invest in Berkshire instead.

[specuvestor]

Actually the evidence, especially when BYD crashed in 2010 and 2011 and fingers were pointing, shows it was Munger's idea. I think their average price was HK$12 or HK$8 not 12XPE per se IIRC

About ten years ago when I just started, WB bought a significant stake in BYD at a 12ish P/E, IIRC.

I thought to myself, maybe I should buy this. But BYD doesn't look cheap at all according to traditional metrics; certainly not like his oft-quoted See's Candies purchase at 6ish P/E.

Turns out WB was right about BYD, and I should have "copied his homework." Of course, WB often espouse buying "things you understand," which also means don't coat tail (which I take to mean follow blindly). Till today, for better or worse, I have yet to coat tail anyone else.

But I guess if there is someone I would choose to "copy," no doubt I will copy from WB. Looking back, just dumping my money into BRK would have provided me with very good returns, and also freed my time for other pursuits.

[Wildreamz]

On the subject of BYD. 

Let's compare it's growth trajectory to Tesla:


From 2016 to 2020, BYD revenue only increased about +50% (~11% CAGR).
Tesla increased revenue about +350% (~46% CAGR).

Yet, BYD market cap increased about 540% in that period.

One can argue that current market price does not reflect the economic reality on the ground (note: I have not done in depth analysis of BYD lately, just purely looking at revenues and market cap). And could be due to general positive sentiment around EVs, the meteoric raise of Tesla (rising tide lifts all boats), and the current 5 years plan of China, putting emphasis on "New Energy Technologies" causing speculators/investors to pour in capital on all NEV related Chinese companies, in anticipation that future State policies will give it a boost.

Hence, could be more reflection of the current market sentiment, then right judgement on the fundamentals (e.g. growth trajectory) of the company.

2c.

[specuvestor]

in 2016 BYD actually had revenue of USD15.6b as it was a car manufacturer and battery / mobile phone maker while Tesla rev was USD7b

Maybe a better metric to compare is market cap to revenue (which is generally a bubble metric but will suffice for this comparison):

Tesla 2016: 34.5/7 = 4.93 Current: 674.7/41.9 = 16.10
BYD 2016: 17.8/15.6=1.14 Current 113.2/27.5=4.12

The ratio has increase about 3.3-3.6X for both companies so I think the EV froth is comparable during this period for both. Fundamental diff I guess is Tesla and NIO was almost insolvent.

Personally I am inclined to think that the picture will be quite different next 5 years as the automaker majors ramp up their EV, and BYD would likely be less impacted due to their diversified market in China.

[Wildreamz]

Similar magnitude of multiple expansion. But 1 company had way more growth during the same period to back that up. Right?


I wouldn't consider 50% growth in 4 years, "hypergrowth", that deserves a 3-4x multiple expansion (Note: I cut off my comparison at end of 2020 instead of their latest quarter result, because I think BYD haven't reported June quarter results yet). 

Of course, the is just a quick and dirty way of comparison, and does not take into account intricacies such as profitability, future growth expectations etc. Perhaps from this quarter on out, BYD might make a quick reacceleration to hypergrowth mode, and the multiple expansion is deserved. And Buffett/Munger's long-term view of the company is validated.

Peace.

[specuvestor]

Focusing on just growth is akin to just focusing on which fund manager has returned best without considering for risk or drawdowns (or Elon’s weight)

I have to admit that Tesla growth is much stronger that I expected 5 years ago, as was expecting the big auto to come in soon, regardless that Tesla was fueled mainly by government carbon credit profits. So regulation played a big part in their growth as well, which I’m not sure will continue if Volkswagen will be producing just EV cars by 2026

[Wildreamz]

Fund managers that outperformed in the short-term, usually faces many headwinds to outperform again: 
(1) New capital pours in, limiting the universe of investments available to the fund manager that made him/her successful in the first place.
(2) Usually short-term outperformance is driven by multiple-expansion and/or cyclical tailwind that is hard to replicate consistently.
(3) Capital usually pulls out and comes in at the worst timings, making asset allocation difficult (force fund manager to buy at top and sell at bottom).
(4) Some element of luck plays a factor in short-term outperformance, hard to replicate.

When analyzing specific businesses is quite different.

In the case of Tesla; 
(1) in free markets, once clear category leader emerges, market leaders (usually) keep winning (https://www.investopedia.com/terms/m/market-leader.asp).
(2) the more cars they make, the better their unit economics, the better the margin, and more financially stronger they gets. Net income less regulatory credits last quarter was $788 million (https://www.thestreet.com/tesla/earnings...-x-credits), and this likely will continue to expand.
(2) global market share of EVs still small (4.6% in 2020; https://www.iea.org/reports/global-ev-ou...le-markets), Tesla still has plenty of room to growth automotive sales before hitting it's automotive growth ceiling. (Then they can still grow in other areas such as energy storage/generation, AI, robotics, HVAC etc. but it's a discussion for another day)

[Wildreamz]

Big Short’s Michael Burry Closes Bets Against Ark, Tesla and Treasuries
https://www.bloomberg.com/news/articles/...treasuries

Among trades that the firm closed in the third quarter were bets against Cathie Wood’s flagship ARK Innovation ETF, Elon Musk’s Tesla Inc. and the biggest Treasuries exchange-traded fund, the iShares 20+ Year Treasury Bond ETF.

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Apparently, the last bear gave up. Those looking for a top signal, this is it.

(just kidding; not investment advice)