Michael Burry’s Protégé Warns of ‘Value Traps’ in Korean Stocks

A protégé of Michael Burry has warned that South Korea’s cheap stocks come with a catch: much of their value is often kept out of reach of minority shareholders.

Phil Clifton, founder of Pomerium Capital Management LLC in Cupertino, California, met with about two dozen companies in Korea and Japan during his trip in August. He returned convinced that investing in Korea “requires a special degree of caution and attention to managerial incentives,” he wrote in a Sept. 29 letter to investors seen by Bloomberg News.

“The Korean stock market does look like capitalist heaven at first glance,” full of businesses with healthy margins and solid growth, he wrote in the letter. Yet, there is frequent misalignment between the interests of shareholders and of those running the businesses, he noted.

While many Korean businesses trade at steep discounts to global peers, that excess value is often out of reach for minority shareholders — particularly in businesses where founding families retain significant control, Clifton said.

Clifton was the last portfolio manager at Scion Asset Management besides Burry, the investor made famous by The Big Short who deregistered the hedge fund in November 2025. Burry pointed clients to Clifton, calling him a tremendous young talent and a prodigious thinker, according to the Financial Times. Clifton started Pomerium in January.

He blames South Korea’s inheritance and gift tax, which can reach 60% in some cases, with stakes in listed companies taxed at market value. That gives controlling families an incentive to suppress stock prices by hoarding cash, investing in unrelated businesses and paying little or no dividends.

“Shares in such enterprises are effectively perpetual bonds with no coupons or principal return, becoming ‘value traps’ that go nowhere regardless of how well the underlying business performs,” he said.

South Korea has drawn growing interest from global investors in recent years as the government pushes corporate governance reforms aimed at boosting shareholder returns, particularly at family-controlled conglomerates known as chaebol. Some investors are optimistic the efforts could lead to a re-rating of the country’s stock market, long held back by the so-called “Korea Discount,” echoing gains in neighboring Japan following similar reforms.

That push, coupled with the country’s key role in the global AI supply chain, helped propel the Kospi up more than 100% this year through a June high, before the rally unraveled as doubts crept in.

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Japan left Clifton more upbeat. The market was until recently full of severely undervalued companies, but efforts by exchange authorities and regulators to resolve the discount have been rather successful, he said.

“Luckily for us, the valuation discounts in Japan have not fully disappeared,” he wrote. That is especially true for smaller, faster growing businesses such as health tech company Medley Inc., Pomerium’s top holding.

Medley’s board announced a dividend policy in August targeting a payout ratio of around 30%. While Clifton prefers more stock buybacks at current prices, he welcomed the move. “It’s certainly a better alternative than buying a luxury hotel or investing in data centers,” he said.