- Maverick manager bets $3.3 million on prison operator
- Alphabet and Meta Platforms among stocks sold
- New holding trades on a 2022 PE of just 6.3
Most people had never heard of Michael Burry before the film The Big Short hit screens worldwide in 2015. He was the eccentric hedge fund manager, played by Christian Bale, who bet against the US housing market in the run-up to the global financial crisis and won.
He’s more widely known now. Burry’s Scion Asset Management is making a bold bet again, this time dumping its entire equity portfolio and buying just one stock.
According to filings with the SEC (Securities and Exchange Commission), Burry’s hedge fund had ditched 11 stocks worth $165 million at the end of March 2022, including Alphabet (GOOG:NASDAQ) and Facebook parent Meta Platforms (META:NASDAQ) - although not put options it held against 206,000 Apple (AAPL:NASDAQ) shares.
BURRY’S ONE GREAT STOCK
The fund's only equity long stake is Geo Group (GEO:NYSE), a relatively obscure company that runs prisons and mental health facilities.
This is roughly a $1 billion company whose stock has held up reasonably well this year, drifting around 10% before the market became aware of Scion’s stake. The shares have jumped more than 25% since to $8.32, which means they are now trading about 6% up on where they started 2022.
Burry’s Scion disclosed a holding of just over 500,000 shares in Geo, worth around $3.3 million at the current price.
The Florida-based real estate investment trust has had a productive year, outstripping second quarter earnings expectations (by 35%) after smashing Q1 Wall Street estimates by 41%. Q2 EPS of $0.42 was reported, versus analyst estimates of $0.31, on $588.2 million revenue, versus the consensus estimate of $561.5 million.
In the past year, Geo has won a new two-year lease agreement with the State of New Mexico to run the company-owned, 600-bed Guadalupe County Correctional Facility, with successive two-year renewal option periods through to 2041.
It has also won a six-month extension to its contract with the US Marshals Service for the 770-bed Western Region Detention Facility in San Diego.
HOME CONFINEMENT CONTRACT
Last month, a GEO subsidiary began operating a pilot program on behalf of the US Department of Homeland Security to place hundreds of migrants caught crossing the US-Mexico border under house arrest. This includes home confinement of 12 hours per day and electronic monitoring while they await court hearings.
Geo shares have fallen from highs of more than $30 in 2017. But while the wider markets may have thought Geo was in terminal decline, not Burry and Scion.
Consensus estimates for this year are pitched at $1.33 EPS on $2.35 billion of revenue, according to Koyfin data. That leaves the stock trading on a 2022 price to earnings multiple of 6.3.
