Today’s major news: Michael Burry, the investor made famous by “The Big Short,” has filed to deregister his fund, Scion Asset Management, with the SEC. In a letter to investors, he announced he is liquidating the fund and returning capital by the end of the year, stating that his “estimation of value in securities is not now, and has not been for some time, in sync with the markets.”
This is a massive move from one of the world’s most-watched contrarians. It’s the ultimate “walk away” move, driven by a complete disconnect between his strategy and the market’s behavior.
So, what exactly is the strategy that he feels no longer works in this environment? For anyone who follows markets, Burry’s approach is a masterclass in deep-value, contrarian investing.
Here’s a breakdown of his core philosophy.
1. The Core Idea: Buying “Road Kill”
Burry’s strategy isn’t complex, but it requires incredible discipline. He famously stated, “I try to buy shares of unpopular companies when they look like road kill, and sell them when they’ve been polished up a bit.”
He is a pure, unadulterated value investor. His entire framework is built on the principles of Benjamin Graham and David Dodd, focused on one primary goal: margin of safety to prevent the permanent loss of capital. He isn’t looking for growth, hype, or story stocks. He’s looking for “sheer, outrageous value.”
2. The Screening: Finding Value Where Others Won’t Look
Burry doesn’t care about market caps or sectors. He’ll look at anything—large, small, mid-cap, tech, or non-tech. He often finds his best ideas in out-of-favor industries that everyone else hates.
His screening process is all about cash flow and enterprise value:
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His Go-To Metric: He starts by screening for a low EV/EBITDA (Enterprise Value / Earnings Before Interest, Taxes, Depreciation, and Amortization). This, he feels, is a better way to find cheap companies than other metrics.
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His “True” Metric: After a stock passes that initial screen, he dives deeper to find its true free cash flow, adjusting for any off-balance sheet items.
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What He Hates: He explicitly ignores P/E ratios (Price-to-Earnings), calling them “deceptive.” He also calls ROE (Return on Equity) “dangerous.” He focuses on companies with minimal debt.
3. The Portfolio: “Rare Birds” and Concentrated Bets
Burry’s portfolio is typically concentrated, holding around 12 to 18 stocks. He believes this is enough for diversification while allowing his best ideas to have a real impact.
Besides his “road kill” stocks, he also hunts for what he calls “rare birds”:
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Asset Plays: Companies trading for less than two-thirds of their net working capital.
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Buffett-Style Compounders: Great businesses with high returns on capital if they become available at a good price.
4. His Unconventional Trading Rules
This is where Burry really separates himself from other value investors:
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He Ignores Taxes: He is not a “buy and hold forever” investor. He anticipates high portfolio turnover (50-200% per year) and is not concerned with tax implications. He says he won’t hesitate to sell a stock “that has a quick 40% to 50% pop.”
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His Contrarian Buy Signal: He prefers to buy a stock when it’s within 10-15% of its 52-week low but has shown signs of price support.
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His #1 Sell Rule: This is his most important, hard-learned lesson. If a stock he owns breaks to a new low, he cuts his losses, period. He will abandon his own fundamental analysis to honor this rule, which he implemented after a single major mistake early in his career.
Why He’s Stopping Now
Understanding this strategy makes his recent decision crystal clear.
Michael Burry is a man who built his career on finding value that the market has mispriced. His strategy relies on the market eventually “waking up” to that value. His decision to shut down Scion is the ultimate declaration that, in his view, the market is no longer a rational mechanism for price discovery. He can’t find value, and he doesn’t believe the “road kill” will be “polished up” anytime soon.
While he’s returning outside capital, it’s hard to believe he’ll stop investing his own. As he cryptically posted on X, he’s “On to much better things Nov 25th.” We’ll all be watching to see what that means.