Michael Burry says he only invests in ‘three-legged dogs’ — though five legs would be even better

Michael Burry says he only invests in ‘three-legged dogs’ — though five legs would be even better

Sam Bourgi

Sun, September 20, 2026 at 3:30 PM GMT+3 5 min read

Michael Burry's decision to invest in something as exotic as bonded fine wine reveals a lot about how the famed contrarian picks his investments.

Burry — who rose to fame for betting against the U.S. housing market ahead of the 2008 financial crisis and was later portrayed in Michael Lewis's The Big Short — explained in a recent Substack post why he was drawn to fine wine after prices fell sharply from their 2022 peak.

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Burry doesn't want an investment to depend on a single thesis. He looks for several independent factors that can make a bet pay off, an approach he calls a "three-legged dog."

And three is only the minimum. "I demand at least three legs and preferably five legs under every investment I make," Burry wrote.

The three legs of wine investing

Each "leg" represents a different reason for owning the investment, giving the thesis more than one way to work.

With wine, one leg was valuation. Prices had fallen sharply from their peak, giving Burry the kind of beaten-down asset he has historically gravitated toward.

In 2000, Burry described his strategy as buying unpopular companies when they looked like "road kill" and selling them after they had been "polished up a bit." A year later, he coined the term "ick investing" for stocks whose names or circumstances were enough to scare most investors away, as Michael Lewis later recounted in Vanity Fair.

Both were underpinned by a principle borrowed from Benjamin Graham and David Dodd. Burry said his stock picking was "100% based" on the concept of a margin of safety, which he described as protecting against a permanent loss of capital.

The second leg was the unusual economics of collectible wine, where bottles are gradually consumed, and the supply of sought-after vintages can only shrink. Unlike a company responding to higher prices by producing more goods, a winery can't go back and bottle more wine from a prized vintage. As collectors drink what already exists, scarcity can increase even without a surge in demand.

The third was more unconventional. Burry sees physical wine stored in bonded warehouses as a potential hedge against a weaker U.S. dollar and, more unusually, disruption to digital financial systems from advances in AI and quantum computing. For Burry, bonded wine is a physical asset held outside the conventional financial system, so its value isn't entirely dependent on dollars sitting in a bank account. In other words, wine could hold its value even if problems emerge elsewhere in the financial system.

Investors don't have to subscribe to Burry's extreme contrarianism or share his concerns about the dollar to take something from the strategy. The broader lesson is to have several independent reasons for owning an investment rather than relying on a single prediction.

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One investment, several reasons to own it

Burry's thesis dovetails with a broader issue facing investors: portfolio concentration.

The CFA Institute has long examined the problem through the lens of portfolio construction. In a 2018 article for the CFA Institute, investor Gary Mishuris argued that the number of investments in a portfolio can understate its true concentration because several holdings may depend on the same underlying driver.

That means one bad call could "permanently impair the value of multiple investments," he said.

More recent research points to the same risk. Research Affiliates, known for its quantitative approach to asset allocation, found in a March 2026 study that value, quality and momentum tend to work at different times, meaning an investment strategy that considers all three depends less on any one of them continuing to perform.

"No single signal — no matter how intuitive or well supported by history — captures the full complexity of markets. Prices reflect expectations, expectations change, and investors themselves are prone to systematic errors," the authors state.

PIMCO, one of the world's largest asset managers, puts a similar idea into practice. Its systematic equity strategy considers more than two dozen signals spanning value, quality, growth and momentum rather than relying on any single measure. PIMCO says this allows it to assess an investment from several angles before deciding how much exposure to take.

The research isn't necessarily an endorsement of Burry's "three-legged dog," but the thinking is similar. Having several independent reasons to own an investment means less is riding on any single assumption being right.

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This article originally appeared on Moneywise.com under the title: Michael Burry says he only invests in 'three-legged dogs' — though five legs would be even better

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