Made famous from the film “The Big Short,” the reclusive investor undergirding Michael Burry stocks is a difficult nut to crack. For some folks – including those high up on Wall Street – Burry is a one-trick pony. For others, he’s the renegade contrarian you can trust. One thing’s for sure: there’s never a boring moment when he decides to issue an enigmatic tweet.
Whatever your personal opinion about Michael Burry stocks to buy, the concept commands respect. True, he has an oddball personality that may rub some people the wrong way. However, we can’t forget that he’s a hedge fund genius and has a license to practice medicine. When he speaks, people should listen, irrespective of their preconceived notions.
Further, the market printed much red ink recently as credibility concerns cloud the Street. Basically, investors aren’t exactly sure if the Federal Reserve can facilitate a soft landing. In my view, that’s a perfect time to consider Michael Burry stocks to buy.
Stellantis (STLA)
It’s always a pleasant surprise when a market genius endorses one of your bullish ideas. For me, the nod from the esteemed list of Michael Burry stocks to buy goes to automaker Stellantis (NYSE:STLA). According to data from HedgeFollow, Burry – via his Scion Asset Management firm – acquired a new position in STLA stock worth $5.7 million.
On paper, Stellantis makes for an intriguing idea thanks to its broadly positive financial profile. For example, the company carries a cash-to-debt ratio of 1.82x, better than nearly 72% of its peers. Operationally, Stellantis prints a three-year revenue growth rate (per-share basis) of 14.6%, beating out 74.32% of sector rivals. And it’s highly profitable, featuring a trailing-year net margin of 10.41%.
Perhaps most enticingly of all, the market prices STLA at 2.78x forward earnings. In contrast, the sector median stands at 11.45x. Lastly, Wall Street analysts also believe in STLA, pegging it a consensus strong buy. This assessment breaks down as 11 buys, two holds and zero sells. The average price target lands at $24.92, implying nearly 40% upside potential.
RealReal (REAL)
An admittedly odd idea for Michael Burry stocks to buy, RealReal (NASDAQ:REAL) is an online and brick-and-mortar marketplace for staff-authenticated luxury consignment, per its public profile. It’s based on the circular economy, selling consigned clothing, fine jewelry, and other consumer products. Interestingly, Scion increased its exposure to REAL stock by over 119%, leading to a total position worth $3.33 million.
However, the issue with RealReal is that it’s a terribly risky idea. Sure, one can point to shares gaining almost 128% since the start of the year. However, the wider dilemma centers on the trailing five years, with shares hemorrhaging over 91% of equity value. As well, the financials are incredibly problematic, particularly with balance sheet vulnerability.
On the positive side, though, RealReal could cynically benefit from rising pressures in the consumer economy. Basically, the company may benefit from being on the lower rung of the trade-down effect as it pertains to the discretionary retail space. Still, you’re taking a risk. REAL only features a hold consensus among analysts with a $2.40 price target implying 3% downside.
Geo Group (GEO)
A private prison and mental health facility operator, Geo Group (NYSE:GEO) easily represents one of the most controversial ideas among Michael Burry stocks to buy. Fundamentally, the problem isn’t about critics being soft on crime. Rather, profiting off the mistakes or mental health crises of others presents moral challenges. Also, when prisons operate under a profit motive, concerns arise about safety (both for the staff and inmates).
Nevertheless, it cannot be avoided that Scion increased its exposure to GEO stock by 50%, leading to a position worth $4.3 million. I’m not going to speculate with absolute conviction as to the reason why Burry decided to buy GEO. However, it’s possible that he may be putting two and two together. Some reports indicate a correlation between economic crises and rising crime rates.
To be fair, it’s a debatable topic. Other studies show no correlation between financial difficulties and increased crime. You’re going to have to make up your own mind on this one. Finally, Noble Financial’s Joe Gomes pegs GEO as a buy with a $15 price target, implying over 110% upside.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.