Michael Burry: Combining Technical Analysis With Value Investing

In his August 9, 2000 Journal Entry, Michael Burry explained how value investors can combine technical analysis with fundamental analysis. Here’s an excerpt from the entry:

Burry: With the market rallying since just prior to the start of the Strategy Lab, I must admit that many of the stocks I wanted to write about have already appreciated some.

This is problematic because even if I like a stock fundamentally, I am rarely willing to buy more than 15% above technical support.

I also generally use broken support as an exit point.

“Sell on new lows” might be another way to put it. If I buy a stock 50% above support, then I must watch a gargantuan loss develop before I eat it. At 15%,

I’m looking at only a 13% loss before support is broken. Combining these guidelines allows me to put the odds a bit more on my side. I look at it as an extra kick to help out my fundamental analysis.

This is not how most value investors operate, but it is something that has contributed to my success. Of course, my rules are not absolute, and I do make exceptions.

You can find a number of Michael Burry’s MSN Money articles here:

Michael Burry – MSN Money Articles