Hedge fund manager Michael Burry is potentially making another bet that a part of the investing world has gotten too hot, just as he did with the broader stock market earlier this year and with the housing market more than a decade ago. Burry’s Scion Asset Management has a put position against 100,000 shares in the iShares Semiconductor ETF (SOXX) , according to a securities filing representing the end of the third quarter released Tuesday. The exact value of the options position is not known, but the notional value of the ‘SOXX’ shares involved was more than $47 million at the end of the quarter. It is also not known whether Burry still holds the position or whether it’s some sort of hedge against a long position. A put option gives investors the ability to sell the underlying asset at a predetermined price. The date of expiration and the strike price of the put position were not disclosed. One put contract typically covers 100 shares of the underlying stock or ETF, so Burry’s position is likely 1,000 put contracts. The SOXX is up more than 30% year to date, and its top holdings include Advanced Micro Devices , Broadcom and Nvidia . SOXX YTD mountain Semiconductor stocks have rallied sharply in 2023. Burry also closed out previous put positions against the S & P 500 and the Nasdaq 100 during the quarter, according to securities filings. Those positions were winners for Burry as the stock market finished the third quarter lower. Burry is one of several hedge fund managers who correctly identified the housing bubble ahead of the 2008 financial crisis. His actions at that time were captured in the Michael Lewis book “The Big Short” and the movie of the same name. Burry closed his previous hedge fund, known as Scion Capital Management, after the financial crisis. The newer Scion Asset Management does also hold long positions on stocks, including a $7.7 million position in Stellantis and a stake in Nexstar Media Group worth just under $7 million, according to the filing. The hedge fund filings do not show all types of derivatives or private investments, so the full scope of Burry’s positions are unknown.
Tag: iShares Semiconductor ETF
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As the 2024 race for the White House gathers steam, one topic that just won’t go away is President Joe Biden’s age.
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The…
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These 11 stocks can lead your portfolio’s rebound after the S&P 500 ‘earnings recession’ and a market bottom next year
This may surprise you: Wall Street analysts expect earnings for the S&P 500 to increase 8% during 2023, despite all the buzz about a possible recession as the Federal Reserve tightens monetary policy to quell inflation.
Ken Laudan, a portfolio manager at Kornitzer Capital Management in Mission, Kan., isn’t buying it. He expects an “earnings recession” for the S&P 500
SPX,
+2.78%
— that is, a decline in profits of around 10%. But he also expects that decline to set up a bottom for the stock market.Laudan’s predictions for the S&P 500 ‘earnings recession’ and bottom
Laudan, who manages the $83 million Buffalo Large Cap Fund
BUFEX,
-2.86%
and co-manages the $905 million Buffalo Discovery Fund
BUFTX,
-2.82% ,
said during an interview: “It is not unusual to see a 20% hit [to earnings] in a modest recession. Margins have peaked.”The consensus among analysts polled by FactSet is for weighted aggregate earnings for the S&P 500 to total $238.23 a share in 2023, which would be an 8% increase from the current 2022 EPS estimate of $220.63.
Laudan said his base case for 2023 is for earnings of about $195 to $200 a share and for that decline in earnings (about 9% to 12% from the current consensus estimate for 2022) to be “coupled with an economic recession of some sort.”
He expects the Wall Street estimates to come down, and said that “once Street estimates get to $205 or $210, I think stocks will take off.”
He went further, saying “things get really interesting at 3200 or 3300 on the S&P.” The S&P 500 closed at 3583.07 on Oct. 14, a decline of 24.8% for 2022, excluding dividends.
Laudan said the Buffalo Large Cap Fund was about 7% in cash, as he was keeping some powder dry for stock purchases at lower prices, adding that he has been “fairly defensive” since October 2021 and was continuing to focus on “steady dividend-paying companies with strong balance sheets.”
Leaders for the stock market’s recovery
After the market hits bottom, Laudan expects a recovery for stocks to begin next year, as “valuations will discount and respond more quickly than the earnings will.”
He expects “long-duration technology growth stocks” to lead the rally, because “they got hit first.” When asked if Nvidia Corp.
NVDA,
+6.14%
and Advanced Micro Devices Inc.
AMD,
+3.69%
were good examples, in light of the broad decline for semiconductor stocks and because both are held by the Buffalo Large Cap Fund, Laudan said: “They led us down and they will bounce first.”Laudan said his “largest tech holding” is ASML Holding N.V.
ASML,
+3.79% ,
which provides equipment and systems used to fabricate computer chips.Among the largest tech-oriented companies, the Buffalo Large Cap fund also holds shares of Apple Inc.
AAPL,
+3.09% ,
Microsoft Corp.
MSFT,
+3.88% ,
Amazon.com Inc.
AMZN,
+6.63%
and Alphabet Inc.
GOOG,
+3.91% Laudan also said he had been “overweight’ in UnitedHealth Group Inc.
UNH,
+1.77% ,
Danaher Corp.
DHR,
+2.64%
and Linde PLC
LIN,
+2.25%
recently and had taken advantage of the decline in Adobe Inc.’s
ADBE,
+2.32%
price following the announcement of its $20 billion acquisition of Figma, by scooping up more shares.Summarizing the declines
To illustrate what a brutal year it has been for semiconductor stocks, the iShares Semiconductor ETF
SOXX,
+2.12% ,
which tracks the PHLX Semiconductor Index
SOX,
+2.29%
of 30 U.S.-listed chip makers and related equipment manufacturers, has dropped 44% this year. Then again, SOXX had risen 38% over the past three years and 81% for five years, underlining the importance of long-term thinking for stock investors, even during this terrible bear market for this particular tech space.Here’s a summary of changes in stock prices (again, excluding dividends) and forward price-to-forward-earnings valuations during 2022 through Oct. 14 for every stock mentioned in this article. The stocks are sorted alphabetically:
Company Ticker 2022 price change Forward P/E Forward P/E as of Dec. 31, 2021 Apple Inc. AAPL,
+3.09% -22% 22.2 30.2 Adobe Inc. ADBE,
+2.32% -49% 19.4 40.5 Amazon.com Inc. AMZN,
+6.63% -36% 62.1 64.9 Advanced Micro Devices Inc. AMD,
+3.69% -61% 14.7 43.1 ASML Holding N.V. ADR ASML,
+3.79% -52% 22.7 41.2 Danaher Corp. DHR,
+2.64% -23% 24.3 32.1 Alphabet Inc. Class C GOOG,
+3.91% -33% 17.5 25.3 Linde PLC LIN,
+2.25% -21% 22.2 29.6 Microsoft Corp. MSFT,
+3.88% -32% 22.5 34.0 Nvidia Corp. NVDA,
+6.14% -62% 28.9 58.0 UnitedHealth Group Inc. UNH,
+1.77% 2% 21.5 23.2 Source: FactSet You can click on the tickers for more about each company. Click here for Tomi Kilgore’s detailed guide to the wealth of information available free on the MarketWatch quote page.
The forward P/E ratio for the S&P 500 declined to 16.9 as of the close on Oct. 14 from 24.5 at the end of 2021, while the forward P/E for SOXX declined to 13.2 from 27.1.
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