"While it's too soon to tell when the tides will turn, I do think it's entirely possible for a hot momentum trade to reverse course without a moment's notice. As such, I'd take Dr. Burry's AI commentary and investment moves as a warning that one must never lose sight of a stock's valuation, even if the growth narrative is one of the most impressive in more than a decade."
"Lululemon Athletica ( NASDAQ:LULU) is an existing long position that Dr. Burry initiated in the second quarter. And it's been a laggard that's continued to lag through the third quarter. Still, what does a value investor do when a value investment gets even cheaper? Buy more, of course! And Burry has done just that in the third quarter, with Scion doubling its position in the hard-hit yoga wear maker that's still in a downward dog."
Scion Asset Management placed about $1 billion in bearish bets against Palantir and Nvidia, targeting popular AI-focused stocks. Rapid momentum trades can reverse suddenly, making valuation the central risk even amid strong growth narratives. Investors should consider whether future growth is already priced into share prices before assuming further upside. Scion also increased select long positions in the third quarter, including a doubled stake in Lululemon after its price decline. Averaging into a cheaper core holding can suit value-minded investors when a high-quality company's shares fall to new lows.
Read at 24/7 Wall St.
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