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.

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).

WBD more than quadrupled off that bottom, peaking near $30 and (10) trading around $27 now (10). While it's not exactly the same example as Burry's six-times example, it's the same basic idea: A stock can keep falling after it already looks beaten down and the investor who holds through it can still catch a huge rebound.

Patience wasn't the whole story, though. A takeover fight helped too. Paramount Skydance Corporation and Netflix bid against each other for WBD and in February, the board accepted Paramount Skydance's offer of $31 a share, or about $110 billion including debt (11). The U.S. Department of Justice (DOJ) (12) cleared the deal on June 12 (12). A real buyer putting $31 on the table is a big reason the stock recovered. But the deal is still facing a lawsuit from a group of states led by California, so the price could still move on the next headline (13).

Investors fixate on what they paid and tell themselves they'll sell once they're back to even, but the market does not care about your purchase price or cost basis. Your return from today is measured from today's price, not whatever you spent when you got the stock.

That said, Burry's example only works if the business really was worth more than the stock price the whole way down. In his setup, the stock got cheaper, but the company underneath it still had real value. WBD recovered because actual buyers decided its studio, HBO Max and cable channels were worth $31 a share.

Plenty of stocks that fall 90% are cheap for a reason and never recover.

Some keep sliding all the way to zero. So the real lesson is not to hold every loser and hope. It's to tell the difference between a stock that is down because the market got it wrong and one that is down because the business is actually breaking.

His hedge fund is closed, so he's not handing out a stock recommendation here. He is saying that once a stock is underwater, your original purchase price shouldn't be the thing that decides what you do next.

Investing in stocks comes with risks — this year has been a reminder of that. Between stubborn inflation, shifting interest-rate expectations and ongoing geopolitical tensions, markets have remained highly volatile. For long-term investors, this often means learning to live with volatility instead of trying to avoid it.

That's why some of Wall Street's most successful investors have consistently emphasized patience.

Burry isn't the only one who believes short-term declines shouldn't automatically result in investors liquidating their holdings. For decades, Warren Buffett has urged investors to overlook short-term market fluctuations.

"You've got to be prepared when you buy a stock to have it go down 50% — or more — and be comfortable with it, as long as you're comfortable with the holding," Buffett said during

Berkshire Hathaway's annual shareholders meeting in 2020 (14).

Of course, remaining calm during a downturn is easier when you've picked quality investments in the first place. Most retail investors don't have access to the same research or analytical tools that Burry and Buffett can easily tap into.

That's where platforms like Moby can help bridge the gap.

Moby's team of former hedge fund analysts and experts spend hundreds of hours each week sifting through financial news and data to provide you with breaking stock recommendations. This way, you can tap into professional-grade stock research and market insights, making it easier to identify potential opportunities without doing any of the heavy lifting.

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.

Building wealth isn't just about what you earn — it's also about what you keep.

That's why keeping investment costs under control can be just as important as finding the next winning stock. Fees may seem small in any given year, but over time they can quietly eat away at your portfolio's potential growth.

Buffett has long pointed to costs as one of the biggest factors investors can actually control.

"If returns are going to be seven or eight percent and you're paying one percent for fees that makes an enormous difference in how much money you're going to have in retirement," Buffett said in an interview with CNBC (15).

Discount brokers like SoFi let you buy stocks, ETFs and more with no commission fees and no account minimums.

The platform is designed for both beginners and seasoned investors, with real-time investing news, curated content and the data you need to make smart decisions about the stocks that matter most to you. What's more, SoFi Active Invest members can access IPOs before they trade on an exchange.

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Investors like Michael Burry have the capital, experience and risk tolerance to weather dramatic declines.

But not everyone has the financial flexibility to watch a stock lose 90% of its value and simply wait for a recovery.

If most of your savings are tied up in one or two volatile stocks, a steep drop can create enormous stress. And if an unexpected expense — a job loss, medical bill or family emergency — forces you to sell while the stock is down, you might end up locking in those losses that take years, or even decades, to recover from.

That's why many financial experts recommend a simpler approach: broad diversification through low-cost index funds.

Even Warren Buffett has instructed that 90% of the inheritance left to his wife should be invested in a low-cost S&P 500 index fund.

"I believe the trust's long-term results from this policy will be superior to those attained by most investors — whether pension funds, institutions or individuals — who employ high-fee managers," he said in a letter to Berkshire shareholders in 2013 (16).

Platforms like Acorns let you invest spare change from everyday purchases into a diversified portfolio of ETFs automatically, helping you steadily build wealth.

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 of ETFs managed by experts at leading investment firms like Vanguard and BlackRock.

Whether you stick to individual stocks or an index fund, there's one undeniable truth — stock investing comes with risks. Especially with recent concerns about AI overvaluation, lingering inflation woes and broader geopolitical risks, stocks have faced plenty of uncertainty lately.

That's why diversification is more important than ever. Gold has long been considered a potential safe haven asset because it tends to move differently from stocks during periods of market stress.

Opening a gold IRA with the help of Goldco allows you to invest in gold and other precious metals in physical forms while also providing the significant tax advantages of an IRA.

With a minimum purchase of $10,000, Goldco offers free shipping and access to a library of retirement resources. Plus, the company will match up to 10% of qualified purchases in free silver.

If you're curious whether this is the right investment to diversify your portfolio, you can download your free gold and silver information guide today.

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Substack (1); Reuters (2), (13); CNBC (3), (4), (14), (15); Companies Market Cap (5); The Wall Street Journal (6); U.S. Securities and Exchange Commission (7); Variety (8); Barron's (9); CNN (10); NBC News (11); CBS News (12); Berkshire Hathaway (16)

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