"Excellent Opportunities": An Investor from "Shorting the Market" Bought Shares in Bookmakers
Using Flutter and DraftKings as examples, the investor demonstrated how he looks for opportunities to earn 15% per year in the market
Bookmakers have faced pressure due to the rapid growth of the prediction market, but Burry believes this is temporary / Photo: Jonathan Weiss / Shutterstock.com
Investor Michael Burry, known as the inspiration for the protagonist in *The Big Short*, announced on his blog, Cassandra Unchained, that he has taken positions in the online betting companies Flutter and DraftKings. He considers both companies to be high-quality businesses and believes that the pressure on their stocks due to competition from prediction markets is temporary.
Details
Burry wrote that he opened a position in Flutter Entertainment at approximately $107 per share. It is the world’s largest online betting and gambling operator: it owns the leading U.S. sportsbook FanDuel, as well as Paddy Power and Betfair in the U.K. and other brands in Europe, India, and Brazil. The company’s shares began trading on the U.S. market about two and a half years ago—Bury noted an increase in trading volume for Flutter shares near their lows and wrote that he likes this trend.
Burry also bought shares of DraftKings at around $26. The company operates exclusively in the United States and is expanding its business in the online sports betting and gambling sectors; according to the investor, it holds a strong market position.
“Both companies have scaled up through mergers and acquisitions. However, in Flutter’s case, my valuation model assumes that the focus will now shift to debt repayment and share buybacks—the level of debt simply necessitates such a strategy.”
Although, according to Burry, Flutter does not always manage its capital efficiently, the company remains a strong business with significant scale. DraftKings is approaching a turning point in its business development, according to Burry, and he sees potential for growth in the upcoming changes. The investor described both companies as “excellent opportunities”—fundamental businesses with very high returns on invested capital.
"Together, they make up a single full position in a ratio of roughly 60 to 40 (Flutter to DraftKings). In the future, I may increase the size of each of them to that of a full standalone position."
Burry considers the rapidly growing prediction markets to be the main threat to Flutter and DraftKings. These markets can operate throughout the United States, circumventing the restrictions that apply to traditional bookmakers, and use the infrastructure of major e-commerce platforms to distribute their products. According to the investor, this competition is already taking business away from bookmakers and has weighed on Flutter and DraftKings’ stock prices. However, Burry believes this pressure is temporary:
“I am convinced that regulators and policymakers will not tolerate this: prediction markets are currently thriving in a gray area, exploiting a loophole right under the nose of a strictly regulated and heavily taxed industry. Over time, this loophole will be closed, and the prediction markets themselves will fall under standard regulation and taxation.”
At the same time, both Flutter and DraftKings have also entered the prediction market by launching their own projects under their respective brands.
What else did Burry buy?
The investor continues to expand his holdings in the Chinese market. In his blog, he reported that he had increased his stake in the online retailer JD, and that it is now among the top three largest holdings in his portfolio.
"In my view, the inevitable cooling of the hype surrounding AI and semiconductors in South Korea and Japan will trigger a capital outflow, which will support the markets in China and Hong Kong."
The Burry Method
When valuing stocks, Michael Burry uses the IV15 multiple he developed—the purchase price at which he expects to earn an average of 15% per year over 15 years. The investor determines this price by analyzing the company’s future cash flows, taking into account the quality of the business and adjusting earnings for stock-based compensation, accounting practices, and other factors.
At the same time, Burry writes, a high-quality company can remain an excellent investment opportunity even above the IV15 level, whereas for a weaker business, the attractive price must be significantly lower.
“The main internal contradiction in my approach to valuation is that a low multiple is by no means always the true value. Fundamental principles are important, and I rely on them, but my valuation methodology—dating back to the 1990s—is not tied to the 1940s concept of value—with all due respect to Graham and Dodd (Benjamin Graham and David Dodd, who laid the foundations of value investing—Oninvest)”
This article was AI-translated and verified by a human editor
