Michael Perry, the Big Short’s investor, has warned investors that a typical market bubble in 2000 and 2008 was looming, with speculative stocks more likely to crash. Perry, better known as the subprime mortgage crisis, has recently sounded the alarm on frothy stocks with a highly inflated market capitalization but little earnings. “This morning there are still 218 major US stock listings with a market capitalization of over $1 billion and an EBITDA of less than $100 million in negative,” Perry said in a Friday tweet. “29 of them have a market cap of over $10 billion, totaling $655 billion. I say that again. All the silliness has to go.” We run a screen in an effort to identify some of the companies with shaky fundamentals highlighted by Perry. All of the following companies have a market cap of over $10 billion and an EBITDA of less than minus $100 million from last quarter. A large number of internet and software names such as Snowflake, Shopify, Twitter, and Roblox topped the list. Also featured in the list were a pair of electric vehicle starters – Rivian and Lucid. These growth-oriented stocks have been hit hard by higher interest rates, as higher borrowing costs hurt the value of future earnings. Value stocks have outperformed their growth peers this year, as investors have turned their backs on companies with ambitious sales and profit expectations far-reaching into the future. Perry, who runs hedge fund Scion Asset Management, has been particularly negative on the Fed being behind the inflation curve and macroeconomic trends as well as investor behavior. Last month, he said the market wasn’t even close to bottoming, warning of massive earnings pressure. In May, he drew parallels between the current market environment and that of 2008, saying it was like “watching a plane crash.” The investor was best known for betting on mortgage-backed securities before the housing bubble collapsed in the mid-2000s. Alongside “Big Short,” Burry has been a hit from the long-running GameStop in the past year, as the Reddit favorite made Wall Street history with his massive short press.
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