Michael Burry, who bet on the 2000s’ financial crisis in The Big Short, has a hot new investment idea.
Prisons.
The latest filing of Burry’s investment group shows a new position in GEO Group (NYSE:GEO) stock. The GEO Group is a small real estate investment trust (REIT) that builds and operates prisons and mental health facilities. The stock jumped 10% on Aug. 15 and another 5% overnight, but still has a market capitalization under $1 billion.
What’s Happening
Burry has become a “Warren Buffett for pessimists,” with a Twitter handle he calls “Cassandra B.C.” making dire predictions about the U.S. economy. His past success in predicting disaster, including warnings about last year’s speculative bubble in tech stocks, has many investors following his lead.
Right now he’s not just warning about a market crash but acting on that assumption. He’s predicting a consumer debt crisis and has sold out of such names as Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Meta Platforms (NASDAQ:META). His August 15 filing shows him liquidating almost his entire portfolio.
Burry’s stake in GEO, however, is worth just $3 million, a small part of even GEO’s small market cap. Before its recent run-up, the shares were yielding 11%. The company has been trying to restructure its $2 billion in debt. It also faces a class action suit concerning the use of forced labor at California detention facilities and an investigation of its officers by a former Louisiana attorney general.
What Happens Now With GEO Group Stock
Burry’s liquidation seems more noteworthy than his position in GEO, given its small size. While GEO stock has been volatile it’s currently trading close to its price of a year ago.
The message is that an investor who often sees disaster, and is sometimes right, is seeing it again. If you believe that, sell. If disaster doesn’t happen, at least you’ll have cash.
On the date of publication, Dana Blankenhorn held a long position in GOOGL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
