US hedge fund manager Michael Burry, who rose to fame with timely bets against the housing market ahead of the 2008 financial crisis, has sold his entire stock portfolio and replaced it with a stake in a prison company, Reuters reported on Tuesday, citing SEC stock filings.
The company, GEO Group, is a publicly traded corporation that operates more than 100 private prisons and mental health facilities in North America, Australia, South Africa, and the UK. According to the report, Burry’s position in GEO Group is worth about $3.9 million.
GEO’s shares jumped 12% on Monday, the largest one-day rally for the stock since last June. Overall, the shares in the company, which has a market value of about $852 million, are down 1.6% for the year to date. However, some analysts say that GEO has a healthy enough cash flow and balance sheet “to merit a speculative investment.”
“GEO Group is arguably a classical example of a cigar butt as defined by Warren Buffett… an approach to investing where you try and find a really kind of pathetic company but it sells so cheap that you think there is one good puff left in it. In other words, a cigar butt is not a good company, but the valuation is so cheap, that a value investor has a good chance to make some money based on the favorable risk/reward skew,” a Seeking Alpha analyst wrote.
Among the stocks that Burry disposed of are Facebook parent Meta Platforms, tech giant Alphabet, insurance company Cigna Corp and pharmaceuticals firm Bristol-Myers Squibb.