Michael Burry: How a stock can fall from $100 to $5 and still deliver a 6x return
Michael Burry: How a stock can fall from $100 to $5 and still deliver a 6x return.
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Watching a stock you own fall by half can make you want to panic-sell or pray the price returns to your entry point so you can exit. But Michael Burry, made famous by the film The Big Short , used a June Substack post to argue that selling is the wrong move (1).
He wrote that once you're deep underwater on a stock, it doesn't matter how much you paid for the stock. The only number that counts is the stock's current price, because that's where your next gain or loss will be measured from.
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Burry, who is known for predicting the U.S. housing crash, has spent the past year warning that the market appears to be a bubble, driven by AI names like Nvidia and Palantir. As a result, he closed his fund, Scion Asset Management, in November 2025 (2) to focus on his paid Substack, Cassandra Unchained (3).
So, writing an article about encouraging a holding pattern, from a man known for betting against things, naturally stands out.
Say a stock falls from $100 to $10 and the business is still actually worth $30. Then a value investor buys at that $10, but then it keeps falling all the way to $5 — a 50% loss for this investor.
Almost everyone sells right there, but Burry says you don't have to. Years later, the stock is back at $30. Measured from that $5 low, Burry called it "a six times return in 10 years" — about 20% a year (1). Even from the investor's $10 purchase price, it's still a triple.
"What I describe here is almost exactly WBD," Burry wrote (1), naming Warner Bros. Discovery [NASDAQ:WSD]. The recovery, he added, didn't take a decade — these things usually don't.
Burry's point is that once you're underwater, the only price that matters is the one you could sell or buy at now.
"That is the price from which any future return will come," he wrote (1).
If you have the patience to wait out the recovery, the upside can go to the investor who held on when everyone else gave up. Burry says that selling just to put a painful position behind you is usually the wrong call in the long run.
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The $100, $5 and $30 in that example are round illustrations, not WBD's real prices, but the actual story is somewhat similar to what happened to WBD.
And WBD wasn't even a stock most of its first owners chose. AT&T spun off WarnerMedia to its shareholders in April 2022 and merged it with Discovery. A lot of retirees and other AT&T holders suddenly ended up with WBD shares they didn't actively buy (4).
The company started with a market value of about $59 billion (5), then spent the next two years getting hammered by debt, cord-cutting (6), the loss of NBA rights and a $9.1 billion writedown (7). By the summer of 2024, the stock had fallen below $7 and the company's market value had shrunk to around $17 billion (8). Plenty of those involuntary owners probably sold somewhere on the way down (9).
