Hedge Fund T2 Partners Still Cautious (Investor Letter) ~ market folly

Thursday, May 20, 2010

Hedge Fund T2 Partners Still Cautious (Investor Letter)

Whitney Tilson and Glenn Tongue's hedge fund T2 Partners recently sent out their May letters to investors and in it they briefly outline how they are still cautious on the markets. They were down 2.6% for April but are still up 10.1% for the year. A lot of their losses stemmed from short positions rallying in their faces such as MBIA (MBI), Ambac (ABK), and Netflix (NFLX) - we've also detailed some of their other short positions in the past as well. However, they won't be covering this shorts anytime soon because they say they have extreme conviction in their picks.

T2 Partners is still cautious on the markets/economy and cite various reasons for their stance such as: eight million Americans still not paying mortgages, high unemployment, and continued stimulus (both monetary & fiscal) causing large deficits. T2 essentially argues that the market is priced for a rosy outcome when the economy is by no means out of the woods yet. Their view is summed up by an interesting chart comparing long term interest rates to average P/E ratios in the market.

Embedded below is hedge fund T2 Partners' May letter to investors:

You can download a .pdf here.

For more insight from this hedge fund, we recently posted up T2's bearish presentation on the housing market as this stance obviously contributes to their overall pessimistic view in the near-term. The presentation also includes an investment idea of Anheuser Busch InBev (BUD). They presented this sequence at the recent Value Investing Congress and you can view detailed notes from the event here. For past commentary from T2, head to their annual letter.

We've also detailed a lot of hedge fund investor letters as of late and if you've missed these great reads we highly recommend checking out the latest commentary from the managers listed below (click to view their respective letters):

- Louis Bacon's Moore Capital Management
- Ricky Sandler's Eminence Capital
- David Einhorn's Greenlight Capital
- Kyle Bass' Hayman Advisors
- Jay Petschek's Corsair Capital

Make sure to check back daily as we're right in the midst of our hedge fund portfolio tracking series.

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