‘Big Short’ investor Michael Burry shorted 6 stocks, and most of them plunged right after. Is there a ‘Burry effect’?

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When Warren Buffett reveals he’s buying something, other investors usually follow suit. His reputation alone can push a share price higher. People call that the “Buffett effect.”

Michael Burry may have the opposite effect, though he doesn’t buy that idea.

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The investor, known for predicting the 2008 housing crash, now writes about his trades on Substack.

And last week one pattern stood out.

He revealed bets against six stocks, and most of them fell in value within days. Business Insider asked him if he thought his calls were moving those stocks, and he pushed back in an email: “I do not believe there is a Burry effect (1).”

Burry ranks second on Substack’s “Bestsellers in Finance” list (2) and has almost 2 million followers on X (3). When someone with that kind of audience says he’s shorting a stock, some people are going to copy him. But you shouldn’t do it just because he did — at least not without understanding why.

What Burry actually bet against

First, the mechanics. Shorting a stock is a bet that the stock will fall — you borrow shares, sell them now and plan to buy them back cheaper later, keeping the difference. If the stock climbs instead, you lose.

On June 30, Burry disclosed shorts against Nvidia, Applied Materials, Caterpillar, Tesla and the iShares Semiconductor ETF (SOXX), a fund that holds Nvidia, Micron and other microchip stocks. The next day he added Micron Technology, posting (4) that it “defines cyclical like no other.” He argues that Micron has taken 34 drops of more than 30% in 42 years, and its long-run returns on capital are “frankly terrible (5).”

Read More: Millionaires under 43 hold only 25% of their wealth in stocks. Here’s where their money is actually going

Did he cause the drop, or just call it?

Then the chips fell. Micron dropped 15% over two days, the SOXX and Applied Materials fell 12% and 17% while Tesla slipped 6% even after reporting more than 480,000 second-quarter deliveries (6). In Seoul on Thursday alone, Samsung fell about 9% and SK Hynix about 15% (7).

Burry didn’t do that alone, though. U.S. investors were already dumping chip stocks that week on doubts about how long the AI spending boom can last, and the selling spread to Seoul.

His shorts landed on a market that was already selling fast. Wealth Club chief investment strategist Susannah Streeter, one of the analysts who told Business Insider a short-lived “Burry effect” is plausible, framed it as “almost the mirror image of the Buffett effect.” Buffett’s approval pulls buyers in, and a Burry warning tends to speed up selling that’s already started.

What this means for your money

It’s tempting to read a Burry short as a sell signal, but exercise caution.

When you copy a big-name investor like Burry, you only see part of the picture. You don’t know his full portfolio, his timing or when he’ll exit.

Take defense contractor Palantir, which Burry began shorting in November (8). By the time last week’s headlines hit, Burry had already halved that bet — buying back half the borrowed shares to lock in part of the gain (9). Palantir has since dropped roughly 40% from its November peak (10), so Burry’s prediction looks to have been correct. But he’s also famous for being right years too early — his housing bet took ages to pay off — and many people are uncomfortable sitting in a losing position for that long.

You also need to separate the stock from the headline. Micron makes memory and storage chips — the hardware that helps phones, laptops, data centers and AI systems handle huge amounts of data.

The week Burry shorted it, the stock fell about 15%. But it had just reported a record quarter, with $41.46 billion in revenue, up about 346% from $9.30 billion a year earlier (11), and a 15% jump in the share price after the report (12).

Sanjay Mehrotra, Micron’s chairman and CEO, called out “the strategic value of memory in the AI era.” Burry’s bet is about price and timing, not Micron’s survival, and calls like that can take their time to prove right or wrong.

When a loud investor posts a trade, it may move prices around for a few days, but it doesn’t decide where those stocks go over time. If you’re holding volatile assets like tech stocks, consider how long you plan to hold them, and if you could stay calm if they dropped across the board by 20% (the definition of a bear market).

That matters a lot more than whatever Burry happens to say this week.

Get a second opinion from Wall Street experts

There’s no denying Michael Burry has earned his reputation. His market calls have made headlines for years, and his investing success has translated into an estimated fortune of around $300 million (13). But what works for a centimillionaire doesn’t always work for someone investing their own retirement savings.

Even if you agree with Burry’s market outlook, copying his trades isn’t as easy as it sounds. Public filings and social media posts rarely tell the full story. You don’t know whether Burry is still holding the position, has already taken profits or has a stop-loss order in place. By the time a trade becomes public knowledge, the opportunity may have already changed.

Instead of hinging your portfolio on the moves of a single expert, it may be smarter to gather multiple perspectives before making a decision.

Platforms like Moby give investors access to research from a team of former hedge fund analysts who spend hundreds of hours each week combing through earnings reports, financial statements and market developments.

Moby’s success speaks for itself. The platform’s stock picks have outperformed the S&P 500 index by about 11.9% over the past four years.

Even better, Moby offers a 30-day money-back guarantee so you can see if the service is right for you. And if you sign up for Moby Premium you get one free top stock to get you off to a good start.

Stick to an index fund

It’s easy to get caught up in headline-grabbing stock picks, especially when investors like Michael Burry make a bold call. That can produce outsized gains if you’re right, but it can also magnify losses if the market moves against you.

That’s especially important to keep in mind, as markets remain highly volatile.

Concerns about AI overvaluation, inflation, shifting interest-rate expectations and geopolitical tensions continue to fuel sharp swings across the market. At the same time, demand for AI infrastructure remains incredibly strong, with experts predicting that AI chip demand will continue to outpace supply for years to come (14). Betting against those companies could prove costly if the AI boom has more room to run.

Rather than trying to pick which side is right, broad-market index funds allow you to own a slice of the entire market.

Diversification helps smooth out volatility while still giving you exposure to companies benefiting from long-term economic growth. Over decades, that approach has historically delivered solid results. The S&P 500 has averaged annual returns of roughly 10.5% since 1957.

Platforms like Acorns allow you to invest your spare change from everyday purchases into an index fund.

Signing up for Acorns takes just minutes: All you have to do is link your cards and Acorns will round up each purchase to the nearest dollar, investing the difference — your spare change — into a diversified portfolio managed by experts at leading investment firms like Vanguard and BlackRock.

With Acorns, you can invest in an S&P 500 ETF with as little as $5 — and, if you sign up today and set up a recurring investment, Acorns will add a $20 bonus to help you begin your investment journey.

Diversify with gold

Whether you’re following Michael Burry’s latest trade or making investment decisions on your own, sharp market swings can quickly turn a winning trade into a losing one.

That’s why many financial professionals recommend diversification. Owning assets that don’t always move in lockstep with stocks can help cushion your portfolio when stocks stumble.

As the saying goes: don’t put all your eggs in one basket.

Gold has long been viewed as one of those defensive assets. During periods of inflation, geopolitical unrest, or economic uncertainty, investors have often turned to the precious metal as a store of value. After all, it can’t be printed at will and has an inherently limited supply.

Today, you can combine the recession-resistant properties of the precious metal with the tax advantages of an IRA by opening a gold IRA with the help of Priority Gold.

And with Priority Gold’s platinum package, you can even get free account setup and insured shipping and storage for up to five years. Plus, you can also roll over your existing IRA or 401(k) into a precious metals IRA with Priority Gold — tax and penalty-free. Just keep in mind that gold is typically best used as one part of a well-diversified portfolio.

The best part? You can download Priority Gold’s wealth preservation guide for free and get up to $10,000 in complimentary silver upon making a qualifying purchase.

Add real estate to the mix

Another way to diversify your portfolio beyond stocks alone is to add real estate to the mix. Investors may benefit from long-term property appreciation while also earning rental income. And unlike stock prices, which can fluctuate by the minute, rental income remains stable because it is generally tied to lease agreements and local housing demand rather than daily market sentiment.

Of course, owning rental property isn’t always as passive as it sounds. Between financing costs, repairs, maintenance, and the occasional late-night emergency call from tenants, being a landlord can quickly turn into a part-time job.

The good news is you don’t necessarily need to buy a rental property outright to gain exposure. You can invest in shares of single-family rental homes nationwide through platforms like mogul.

Founded by former Goldman Sachs real estate investors, mogul handpicks the top 1% of single-family rental homes nationwide for you. This way, you can invest in institutional-quality offerings for a fraction of the usual cost — while receiving monthly rental income, real-time appreciation, and tax benefits.

The team at mogul carefully vets each property, requiring a minimum 12% return even in downside scenarios. Across the board, the platform features an average yearly return of 18.8%. Their cash-on-cash yields, meanwhile, average between 10% to 12% annually. With investments typically ranging between $15,000 and $40,000 per property, offerings often sell out in under three hours.

Getting started is a quick and easy process. You can sign up for an account and then browse available properties. Once you verify your information with their team, you can invest like a mogul in just a few clicks.

— With files from Godwin Oluponmile

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Article Sources

We rely only on vetted sources and credible third-party reporting. For details, see our ethics and guidelines.

Business Insider (1); Substack (2); @michaeljburry/ X (3); Michael J Burry Substack (4); The Street (5), (9); Tesla Investor Relations (6); CNBC (7), (12); Stocktwits (8); Morningstar (10); Micron Investors (11); Stockcircle (13); Yahoo Finance (14)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.