T2 Partners' Portfolio Update From Latest Letter: NFLX, SNDK, BKS & More

Whitney Tilson and Glenn Tongue's hedge fund T2 Partners recently sent out their latest letter to investors providing an update on many of their portfolio positions.  T2 is up 25.8% for the year versus the S&P at 11.9%.

T2's Longs

Disclosed longs in this letter include: Netflix (NFLX), SanDisk (SNDK), Grupo Prisa (B shares), Goldman Sachs (GS), Citigroup (C), Barnes & Noble (BKS), dELiA*s (DLIA) and AIG (AIG).

T2's Shorts

Nokia (NOK), First Solar (FSLR), Tesla (TSLA) and Interoil (IOC) are mentioned as shorts.

On Their Position in Netflix (NFLX)

In the letter, he updates the latest activity on this volatile stock, writing:

"We’re comfortable with a 5-6% position size – but the stock price has been extremely volatile, ranging from $62 to $129 in the six months we’ve owned it, so we’ve done much more trading than we normally do, first trimming aggressively and banking a lot of profits as the stock skyrocketed earlier this year, and then adding to our position recently after it fell sharply.

The company reported very strong Q1 earnings a week ago: revenues grew 21%, domestic streaming subscribers jumped by 1.7 million to 23.4 million, international subscribers grew by 1.2 million to 3.1 million (up 282% year over year), and total unique subscribers grew by 2.9 million to 29.1 million (including the DVD-by-mail business).

So why was the stock down so much? Netflix’s guidance for Q2 was weaker than expected: a projected gain of only 190,000-790,000 domestic subscribers and 385,000-935,000 international subscribers. Bears see this as the beginning of the end of Netflix’s subscriber growth, but we see it as typical second quarter seasonal weakness combined with the company being very conservative in its guidance, setting a bar that should be easy to clear. We believe what the company wrote in its earnings release – “We see nothing new or particularly concerning this quarter to date in our member viewing, acquisition and retention. All are healthy.” – and have no reason to doubt Netflix’s guidance of “about 7 million...domestic streaming net adds” for all of 2012."


Embedded below is T2's letter where they also provide updates on their positions in SanDisk, Barnes & Noble, as well as Grupo Prisa:




For more from this fund, we've also posted up Tilson's presentation at Stern's Hedge Fund Association Summit as well as his talk at a long/short investing panel.

T2 Partners January Letter: Portfolio Update

It's been a while since we've checked in on Whitney Tilson and Glenn Tongue's hedge fund T2 Partners so here is their January letter to investors. While they had a horrible year last year (-24.9%), they were up 12.6% in January.

The letter mentions some of their longs: Pep Boys (PBY), Goldman Sachs (GS), Iridium (IRDM), Resource America (REXI), Dell (DELL), Howard Hughes (HHC), Citigroup (C), and Microsoft (MSFT).

Also, they mention they are long SanDisk (SNDK) and bought more after the company provided weak guidance.

T2 Partners also revealed some more of their shorts: Lululemon (LULU), Interoil (IOC), ReachLocal (RLOC), First Solar (FSLR), Green Mountain Coffee Roasters (GMCR), ITT Educational (ESI), and Salesforce.com (CRM).

Their letter also provides more in-depth updates on their positions in Netflix (NFLX) and J.C. Penney (JCP) which you can read below: T2 Partners January letter



For more from this hedge fund, you can view T2's presentation on Berkshire Hathaway and JCP.

And then for presentations from other funds, we posted up Bill Ackman on Canadian Pacific today too.

Whitney Tilson's Value Investing Congress Presentation on Berkshire Hathaway & J.C. Penney

At day two of the Value Investing Congress, Whitney Tilson & Glenn Tongue of hedge fund T2 Partners gave the case for going long Berkshire Hathaway (BRK.A) and J.C. Penney (JCP) in a presentation entitled "Many Ways to Win."

Be sure to check out all our notes from the Value Investing Congress.


Whitney Tilson & Glenn Tongue (T2 Partners)

Embedded below is their full slideshow presentation:




The hedge fund pitched J.C. Penney (JCP) and they have a $71 price target (stock $31 now). “Decent” business. Followed Ackman, but got a lot more interested with new CEO on board. Story well known, same as Bill Ackman’s JCP thesis a few months ago. Persistent question about how the real estate value can be realized.

Other new stocks they have added in size: Goldman Sachs (GS), Citigroup (C), and Sandisk (SNDK). GS, C: Ackman also has these positions. Says trading at discount to book value. Says everyone ignores a fabulous business at C’s “good bank” and only looks at the bad bank portion.

SNDK: they own disk drive makers, says 90% storage on spin platters, the other 10% will be in Flash memory. Memory capacity constrained, explosive demand via tablets, smartphones. NAND has historically been commodity product, but being spec’d into a smartphone is different, enormous operating leverage, SNDK has IP on MLC.

You must overcome your initial knee-jerk reaction that “this is a terrible business.” The industry has changed- consolidated, and demand is exploding. Every iPad, iPhone needs it, yet analysts all expect pricing to fall as technology falls. They think pricing will improve. SNDK is trading so cheap, at a 6x P/E, and it could grow and trade at 20x P/E. Says a massive portion of the margin in iPhones is the incremental NAND. SNDK in the 4S.

As indicated in our September hedge fund performance numbers post, T2 was -9.5% in September and -29.6% for the year at that time.


Don't miss the rest of the hedge fund manager presentations in our notes from the Value Investing Congress.

Dan Loeb's Third Point Reduces Equity Exposure For Fifth Straight Month

Dan Loeb's Third Point Offshore Fund finished -3.5% for September compared to -7% for the S&P 500. Third Point sits at 0.2% year-to-date. The Offshore Fund manages just over $4 billion and has seen annualized returns of 17.6% since 1996.


Third Point Reduces Equity Exposure For Fifth Straight Month

In what has been an ongoing theme, Third Point reduced equity exposure yet again in September. Earlier in the year, we highlighted Loeb's cautious stance as he began to reduce exposure. At the end of September, Third Point was only 15.6% net long equities, compared to 17.7% net long a month prior.

Obviously such positioning has led to Third Point's outperformance. Geographically, Third Point has been net long the Americas and net short the EMEA and Asia regions. Risk management has been the name of the game for the fund this year.

In September, Loeb's largest net long exposure came in the technology sector at 8.9% and energy at 3.4%. Third Point is net short industrials at -1.3% and utilities at -0.5%.

In credit, Third Point is 15.6% net long, down from 18.5% net long in August. They continue to have the largest exposure to asset backed securities and remain short government issues.


Third Point's Top Positions

1. Yahoo! (YHOO)
2. Gold
3. Delphi
4. El Paso (EP)
5. Technicolor (multiple securities owned)

We detailed Loeb's activist investment in Yahoo when he first took the position. He also presented his bull case for YHOO at the Delivering Alpha conference.

Third Point's biggest winners last month were commodity short A, energy short basket, SanDisk (SNDK), auto suppliers short basket, and short B. Obviously they don't name their short positions but it's no surprise that many shorts were their top percentage gainers. The hedge fund's biggest losing positions last month were gold, Mosaic (MOS), Delphi, CVR Energy (CVI), and Yahoo! (YHOO).

Assuming Third Point still owns Mosaic, you have an opportunity to purchase shares at prices lower than the hedge fund. They originally bought MOS at $65 on the Cargill family secondary and then subsequently bought the dip in June (presumably around $60). MOS shares now trade around $49.