Learning from Michael Burry
Tariq at the Street Capitalist blog had a great post on learning from Michael Burry.
Excerpt from Tariq’s post:
Later, he cites the Rediscovered Benjamin Graham book’s material in order to argue that going long value stocks may not be enough if we are faced with a downturn:
“I’d like to think that if I own real absolute value stocks it won’t matter if the big indexes drop 50%. But that might be wishful thinking. ”
Jim, in that Rediscovered book, Graham makes it quite clear that value stocks will be punished every bit as much and probably more in a market downturn, according to his research. He of course advocates raising cash or adjusting to bonds if one thinks the market is too high. In another area, though, he talks of the tremendous values that can be found even in a high-priced market. I find this book fascinating — lots of stuff I hadn’t read before.
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My guess is that most of Wall Street did not bother to wade through the hundreds of pages that comprised a subprime MBS. Unlike Burry, who sat in an office and learned these bond deals by himself, most of Wall Street likely deferred their judgement to the ratings agencies or sell side contacts. Ultimately, those groups lacked any substantial knowledge about these securities, they models were flawed which made their opinions flawed. So when investor groups came to them to get their opinions, they were almost always given the wrong answer.
Going through all of Burry’s posts, you will see that he was constantly analyzing stocks. To the point where he was at least posting a few ideas every week, in addition to his day job. To me, that is the definition of deliberate practice for an investor. You really have to get into the habit of frequently analyzing and valuing companies. In one post, Burry mentions that he has built a watch list of over 80 companies that he would be ready to pounce on if they ever hit his target price. That level of work, with a tendency to think independently, should help improve anyone’s investing.
This quote by Michael Burry in The Big Short says it best:
I have always believed that a single talented analyst, working very hard, can cover an amazing amount of investment landscape, and this belief remains unchallenged in my mind.
Link to Complete Post
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Related previous posts:
Betting on the Blind Side - By Michael Lewis
Deliberate Practice: Becoming a Better Investor
- Michael Burry Profiled: Bloomberg Risk Takers (video)
Thanks to Kjetil for passing the link below along and Andrew for letting me know when it came on TV yesterday. July 20 (Bloomberg) -- "Bloomberg Risk Takers" profiles Michael Burry, the former hedge-fund manager who predicted the housing market’s plunge....
- Michael Burry: Bernanke Can’t Use ‘poison As The Cure’
Found via GuruFocus.Michael Burry, the former hedge-fund manager who predicted the housing market’s plunge, said Federal Reserve Chairman Ben S. Bernanke is trying to use “poison as the cure” by pumping more cash into the economy to spur growth.Bernanke’s...
- Video: Michael Burry On Bloomberg
Link to: Burry Discusses Investing in Farmland, Real Estate, Gold ………. Article: Burry, Predictor of Mortgage Collapse, Bets on Farmland, Gold Excerpt: Michael Burry, the former hedge-fund manager who predicted the housing market’s plunge, said...
- Michael Burry: A Primer On Scion Capital’s Subprime Mortgage Short – November 7, 2006
Found via the Distressed Debt Investing blog. Link to: A Primer on Scion Capital’s Subprime Mortgage Short ……………….. Related previous posts: Betting on the Blind Side - By Michael Lewis 60 Minutes: Inside The Collapse Learning from Michael...
- Deliberate Practice: Becoming A Better Investor
Tariq at the Street Capitalist blog had a great post on a frequent topic on this blog: deliberate practice. He had some great thoughts on applying deliberate practice to investing, which are pasted below. I gave a presentation on this topic last March....