We recently compiled a list of the Michael Burry's Top 10 Stock Picks Heading into 2025.In this article, we are going to take a look at where Molina Healthcare, Inc. (NYSE:MOH) stands against Michael Burry's other stock picks.
Established in May 2013, Scion Asset Management is a renowned and well-regarded California-based hedge fund founded by Michael Burry. The investment management firm focuses on long-term capital appreciation via fundamental research. The company targets undervalued or misunderstood investment opportunities globally. Michael Burry, a renowned figure in the financial world, shot to fame after his accurate predictions during the 2008 financial crisis. The hedge fund manager has a bachelor's degree in economics from the University of California, Los Angeles. Also, he pursued an M.D. from Vanderbilt University School of Medicine.
After Michael Burry founded Scion Capital and predicted the late 2000s housing bubble burst, he rolled out Scion Asset Management in 2013, rebranding the prior fund.
Michael Burry Goes Long on China
As of now, Michael Burry remains optimistic about the Chinese economy, with Scion Asset Management significantly investing in renowned and well-established Chinese companies. Over the past few weeks, the Chinese stock market has seen a significant rally, with the Hang Seng Index increasing by ~17% and the SSE Composite Index rising by more than ~18% over the past month. Market experts believe that these increases primarily stemmed from the stimulus measures announced by the government.
As per the hedge fund's 13F filing for the quarter that ended June 30, Michael Burry significantly increased his ownership in the Chinese tech companies, while liquidating his investments in gold and other companies belonging to solar, energy, and other sectors. The renowned investor also entered several new positions in sectors such as financial services, healthcare, beauty, and real estate industries. Over the past few weeks, there has been growing optimism about the Chinese economy.
BBVA Research believes that the Chinese economy has been witnessing structural rebalancing amid adjustments in real estate. Thanks to the large-scale stimulus package, the company expects that the economy will bottom out in the near term. Moving forward, the firm believes that the US and Europe's rate cut cycle offers policy room for China's easing measures. As and when the large China-US rate reversion sees normalization, there can be increased capital inflows and stronger RMB.
The prolonged rebound in China after the COVID-19 pandemic, offset by other sectors such as manufacturing and real estate, significantly dragged down China's stock valuations, making it attractive for investors.
Peeking into Michael Burry's Concentrated Portfolio
'Big Short' investor's noteworthy move in Q2 2024 was a significant rise in his stake in a Chinese e-commerce giant. This stock is now the largest holding of the portfolio. Even though the Chinese regulatory landscape continues to evolve, it is demonstrating signs of easing. Therefore, market experts opine that this can help create a more favorable environment for Chinese technology companies.
Beyond e-commerce, the hedge fund manager's Q2 2024 portfolio focuses on strategic allocation throughout varied sectors. Scion Asset Management appears to be going long on the payment processing sector also. Since the investment firm has a diversified portfolio, experts believe that the company is well-placed to navigate any short-term economic headwinds.
Our Methodology
To list Michael Burry's Top 10 Stock Picks Heading into 2025, we sifted through Scion Asset Management’s latest 13F Holdings. From the list, we selected the top 10 stock picks, and the same are ranked in ascending order of the fund’s stakes in them.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A doctor in scrubs shaking hands with a patient, representing the healthcare services provided to individuals and families.
Molina Healthcare, Inc. (NYSE:MOH) operates as a managed care organization. It arranges for the delivery of healthcare services to persons who are eligible for healthcare programs for low-income families and individuals.
Molina Healthcare, Inc. (NYSE:MOH)’s strategic focus on Medicaid, along with its active mergers and acquisitions (M&A) strategy, places it well in the healthcare market. Wall Street remains optimistic about the company's acquisition of ConnectiCare. The acquisition reflects a strong strategic fit for the company, adding an established government business, a recognized brand, and a statewide provider network. This move is expected to add $1.00 per share to the new store-embedded earnings. It should also enhance the company's financial performance and exhibit its commitment to growth through targeted acquisitions.
Molina Healthcare, Inc. (NYSE:MOH) has successfully extended its Medicaid contracts in critical states like Virginia and Florida. This ensures continued revenue streams. The success in contract renewals demonstrates robust operational capabilities and a healthy competitive position in these markets. Molina Healthcare, Inc. (NYSE:MOH)'s effective medical management practices, primarily in managing re-joiners, and favorable geographic diversification should act as critical tailwinds.
The company's aggressive growth strategy might enable Molina Healthcare, Inc. (NYSE:MOH) to expand its market presence, diversify revenue streams, and achieve economies of scale. Analysts at Wells Fargo & Company upped their price objective on the company's shares from $315.00 to $360.00, giving an "Equal-weight" rating on 5" August.
Fidelity Investments, an investment management company, released its second quarter 2024 investor letter. Here is what the fund said:
“On a stock-specific basis, a larger-than-benchmark stake in Molina Healthcare, Inc. (NYSE:MOH) (-28%), a California-headquartered managed care firm, was the biggest relative detractor. The past year has been a difficult one for the managed care industry, due to rising medical costs and government reimbursements that have not kept pace. The past three months, Molina’s stock was dragged down by negative sentiment for the segment, even though its latest earnings report, in April, was better than expected.”
Overall MOH ranks 3rd on our list of Michael Burry's top stock picks. While we acknowledge the potential of MOH as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than MOH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
