Summary of "Why Michael Burry Just Sold All His Stocks"

Michael Burry’s Recent Portfolio Moves

Michael Burry, renowned for predicting the 2008 financial crisis, has recently liquidated over $70 million of his stock holdings, exiting nearly his entire equity portfolio except for one stock: [Estee Lauder](https://www.amazon.com/dp/B0FHH7LJWS?tag=dtdgstoreid08-20) (ticker: EL). He doubled his stake in [Estee Lauder](https://www.amazon.com/dp/B0FHH7LJWS?tag=dtdgstoreid08-20) from 100,000 to 200,000 shares, now worth approximately $13.2 million, making it 100% of his stock portfolio. This marks a significant strategic shift from his previous focus on Chinese tech giants and defensive/value stocks in healthcare and consumer staples.

Key Assets Mentioned

Estee Lauder (EL) – Cosmetics giant, now Burry’s sole equity holding.
Chinese tech stocks sold off:
- Alibaba (BABA)
- BU (ticker unclear, possibly Baidu or another Chinese tech)
- JD.com (JD)
- PDD Holdings (PDD)
- Trip.com (TCOM)
Nvidia (NVDA) – Targeted with bearish put options.

Portfolio & Market Context

Burry’s Q4 2024 portfolio was heavily weighted in Chinese tech and defensive/value sectors.
Currently, he holds only [Estee Lauder](https://www.amazon.com/dp/B0FHH7LJWS?tag=dtdgstoreid08-20) stock and has initiated over $187 million in short positions (put options) on highly valued tech companies.
Estee Lauder’s stock has fallen over 80% from 2021 highs, with recent poor financials including:
- 10% drop in Q1 net sales
- Shrinking operating margins
- Halved earnings
- Reduced cash flow
The company’s revenue is 31% exposed to Asia-Pacific, an area hit hard by China’s economic slowdown.
Despite challenges, [Estee Lauder](https://www.amazon.com/dp/B0FHH7LJWS?tag=dtdgstoreid08-20) maintains a strong gross margin of 75% and a price-to-sales ratio of 1.67, which is lower than competitors, indicating potential undervaluation.
The company has a new CEO with a turnaround plan underway.
Burry’s move aligns with the “lipstick effect” theory — cosmetics sales tend to hold up or grow during recessions as consumers trade down to affordable luxuries.

Investment Thesis & Strategy

Burry is making a contrarian, value-oriented bet on [Estee Lauder](https://www.amazon.com/dp/B0FHH7LJWS?tag=dtdgstoreid08-20)’s recovery amid a likely economic downturn or recession.
He expects a pullback in overvalued tech stocks, especially those tied to AI growth narratives (e.g., [Nvidia](https://www.amazon.com/dp/B08WPRMVWB?tag=dtdgstoreid08-20)), which he believes are priced for perfection.
His bearish put options total approximately $187 million, allocated as follows:
- [Nvidia](https://www.amazon.com/dp/B08WPRMVWB?tag=dtdgstoreid08-20): $97.5 million in puts
- Alibaba: $26.45 million
- PDD Holdings: $23.7 million
- JD.com: $16.45 million
- BU: $9.2 million
- Trip.com: $12.72 million
This shift signals a cautious or bearish macroeconomic outlook, particularly regarding Chinese tech and high-growth U.S. tech stocks.

Historical Context

Burry’s past contrarian successes include:
- Shorting the housing market before the 2008 financial crisis.
- Investing early in GameStop before its 2021 short squeeze.
The lipstick effect has historical precedent:
- [Estee Lauder](https://www.amazon.com/dp/B0FHH7LJWS?tag=dtdgstoreid08-20)’s revenue grew during the 2001 recession (+5.5%) and the 2008 financial crisis (+7.7%) despite GDP contractions.