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 American Coastal Insurance Corporation (NASDAQ:ACIC) 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 woman in a business suit in an insurance office, analyzing a policy.
American Coastal Insurance Corporation (NASDAQ:ACIC)
Scion Asset Management’s Stake Value: $2,657,461
Number of Hedge Fund Holders: 15
American Coastal Insurance Corporation (NASDAQ:ACIC) operates as an insurance firm. It underwrites condominium and homeowner association properties.
In the recent earnings call, American Coastal Insurance Corporation (NASDAQ:ACIC) mentioned that the core catastrophe reinsurance program was renewed, with the anticipation to fuel revenue and earnings. Wall Street analysts believe that the company remains well-positioned to thrive in the insurance market, considering the forward-looking guidance which suggests positive growth in net income from continuing operations and net premiums earned.
Wall Street expects that the divestiture of Interboro Insurance Company should help in streamlining its operations. This, along with American Coastal Insurance Corporation (NASDAQ:ACIC)’s proactive reinsurance strategy, should enhance the company’s market position. Its focus is mainly on low-rise commercial property insurance in Florida, with the help of its exclusive managing general agency agreement and long-term partnership.
American Coastal Insurance Corporation (NASDAQ:ACIC), the insurance holding company of American Coastal Insurance Company (“AmCoastal”), announced that AmCoastal entered into a 5-year extension of its exclusive Managing Agency Contract with AmRisc, LLC effective June 1, 2024, and expiring January 1, 2029.
American Coastal Insurance Corporation (NASDAQ:ACIC)’s continuous portfolio optimization process aims to balance risk appetite and underwriting profit opportunities with its available capital and reinsurance capacity in a bid to achieve consistent and sustainable underwriting profitability. Notably, deep underwriting expertise and strong reinsurance support are expected to act as tailwinds for the company in the near term.
Overall ACIC ranks 8th on our list of Michael Burry's top stock picks. While we acknowledge the potential of ACIC 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 ACIC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
