- Warren Buffett and Michael Burry's firms both invested in Capital One stock last quarter.
- Buffett's Berkshire also dumped two bank stocks, whereas Burry's Scion loaded up on lenders.
Warren Buffett's Berkshire Hathaway and Michael Burry's Scion Asset Management both pounced on Capital One stock last quarter, but seemed to diverge on the wider financial sector.
Buffett's company scooped up 9.9 million shares of the credit-card specialist, securing a stake worth $954 million on March 31. Meanwhile, Burry's fund amassed 75,000 shares worth $7.2 million at the end of the quarter.
Their purchases were revealed in Securities and Exchange Commission filings on Monday. Capital One's stock price climbed 3% on Monday, and gained another 5% in early trading on Tuesday.
Funds linked to other prominent investors including Steve Cohen, Jeremy Grantham, Jim Simons, and Ken Fisher also bought Capital One shares last quarter. For example, Cohen's Point72 Asset Management established a position of 449,000 shares worth $43 million on March 31, and purchased bullish call options on another 600 shares.
Buffett and Burry - best known for his starring role in the book and movie "The Big Short" - are both value investors who specialize in identifying and buying underpriced stocks. Their teams likely determined that Capital One shares, which have roughly halved in price since August 2021, were a bargain and worth buying.
However, Berkshire and Scion took different tacks when it came to other bank stocks. Buffett's conglomerate exited its bets on BNY Mellon and US Bancorp last quarter, after slashing both positions in the fourth quarter of last year. In contrast, Burry's fund added First Republic, Pacific Western, Western Alliance, New York Community Bank, and Huntington Bank to its stock portfolio.
It's little surprise that Buffett exited two bank stocks last quarter. He accused lenders of excessive risk-taking and deceptive accounting during Berkshire's recent annual shareholder meeting, and said the banking business was less attractive now than in the past.
Burry's purchases were more unexpected, given his since-deleted tweets about the banking debacle. He suggested Silicon Valley Bank might be this generation's Enron, and compared the turmoil to the dot-com and housing crashes. He also shared a chart comparing US banks' deposit bases and capital losses, probably to show which lenders were vulnerable to a SVB-style collapse.
On the other hand, the Scion chief noted on March 13 that the banking fiasco could be resolved swiftly and he didn't see any great danger. Also, after tweeting "Sell" in late January, he seemed to backtrack in late March when he wrote he "was wrong to say sell." He may have decided the banking sector wasn't at serious risk of a meltdown, and it made sense to capitalize on the fear in markets and buy cut-price shares in beaten-down lenders.
Berkshire and Scion's divergence on bank stocks might reflect their different investing strategies and risk appetites. Buffett famously preaches financial prudence and a long-term mindset. Meanwhile, Burry tends to overhaul his portfolio each quarter, entering and exiting positions much more frequently than Berkshire.
It's worth emphasizing that quarterly portfolio disclosures don't always tell the full story, as they exclude private, overseas, and non-stock investments, as well as short-selling activities. They also provide a snapshot of a fund's holdings six weeks in the past, and those positions may have changed by the time of their release.