Whitney Tilson recently launched a new investment conference focused on short selling called the Kase Learning Short Selling Conference. They've released some videos of pitches from the presentations and we've aggregated them here along with notes from each talk if you just want a quick summary.
Click each link below to go to the presentation.
Kase Learning Short Selling Conference Presentations 2018
- Sahm Adrangi (Kerrisdale Capital): On ad fraud and Quinstreet (QNST)
- Mark Spiegel (Stanphyl Capital): Short Tesla (TSLA)
- Gabriel Grego (Quintessential Capital): Short Folli Follie
- Jillian McIntyre (221B Capital): Short Intelsat (I)
- Berna Barshay (Viola Capital): Short Ralph Lauren (RL)
- Enrique Abeyta: Short Anheuser Busch InBev (BUD)
- Chris Brown (Aristides Capital): Short Energous (WATT)
- Asher Jacobs & Jade Hu (Columbia MBAs): Short Stericycle (SRCL)
Monday, June 4, 2018
Kase Learning Short Selling Conference Presentations 2018
Mark Spiegel Short Tesla Presentation: Kase Learning Conference
We're posting up a series of presentations from the recent Kase Learning Short Selling Conference. Next up is Mark Spiegel who pitched short Tesla (TSLA). He thinks the company is a zero.
Mark Spiegel's Presentation: Short Tesla (TSLA)
- Telsa's financials are horrible and has no moat of any kind, and this is all before a ton of competition comes online
- Management can't be trusted after Elon Musk made misleading statements
- Lost over $25,000 per car sold based on recent earnings. Sales of two top models were down double digits year-over-year, again this is before top competition comes online from Porsche, Jaguar and others
- $2.3 billion in negative net working capital, And - $1bn in negative net working capital. Bulls point to the story being about 'the future' but Tesla's tax credits will expire later this year while competitors will just be starting to use their credits.
- Competition coming: Jaguar I-Pace coming out is $10,000 less and much nicer. Jaguar XJ Sedan also going electric. Audi electric SUV coming 2018 winter and priced $5000 cheaper once Tesla's tax credit runs out. Porsche's Mission E sedan coming. Mercedes' ECQ coming out and electric version of the S Class. Hyundai coming out with a crossover for the mass market. Chevrolet Bolt out now. Nissan Leaf next year increases electric range. First electric Volvo comes out next year. BMW iX3 comes out in 2 years, and i4 flagship electric car. The list goes on and on.
- China is a big market and very important; bulls think TSLA will gain share there but the reality is that so much competition is coming especially in that country that they've already lost
- Other car companies using larger battery cells and Tesla is committed to smaller, inferior ones
- Stunning number of executive departures. Jim Chanos said the only two companies that had similar numbers are Enron and Valeant
Embedded below is the video of Mark Spiegel's presentation:
Be sure to check out the rest of the presentations from the Kase Learning Short Selling Conference.
Sahm Adrangi's Presentation on Ad Fraud & Short QuinStreet: Kase Learning Short Selling Conference
We're posting up a series of presentations from the recent Kase Learning Short Selling Conference. Next up is Sahm Adrangi of Kerrisdale Capital who presented about ad fraud and talked about Quinstreet (QNST) which he published a short report on last month.
Sahm Adrangi's Presentation on Ad Fraud & Short QuinStreet (QNST)
- Recently gave a presentation on being short St. Joe (JOE) and short QuinStreet (presentation here), the latter of which plays into the theme of ad fraud
- Ad fraud is basically when online ad impressions or clicks are artificially higher due to bots, not actual users viewing the material. Pay-per-click ads see 'fake' clicks and then there's sites with tons of fake traffic that are just full of ads to inflate the numbers. Ad stuffing is when a video has other videos behind the main video someone is watching, giving impressions to something that's not actually being viewed
- Ad fraud is so prevalent and the intermediaries are beneficiaries of it (ad agencies etc), making them slow to adopt preventive measures. The ultimate loser is the buyer of the ad but it's difficult to detect who is viewing your ad (human vs bot)
- Technology is rapidly evolving and the bad actors are using more sophisticated measures to generate more fraud
- QuinStreet: if you look at investor presentations or management comments, it's hard to discern where exactly the revenue is coming from (lead generation, or ad-matching placements, etc). Another report by a separate firm attacked Criteo late last year for suspect traffic as well.
- Walked through examples where some of Quinstreet's sites were receiving traffic from other sites that isn't what it seems: a car insurance site was receiving a lot of traffic, but not from people looking for quotes on car insurance, but rather people earning 'swag bucks' for filling out online surveys and things like that. Thus car insurers buying ads / paying for leads, weren't really getting what they thought they were (the video below walks through the whole scenario as it's too long to type out)
- Thinks the opacity in the online ad space and lack of disclosures is a good place for short activists to hunt
Embedded below is the video of Sahm Adrangi's presentation:
mbedded below is the slideshow pdf of Sahm Adrangi & Kerrisale Capital's presentation on short QuinStreet (QNST):
Be sure to check out the rest of the presentations from the Kase Learning Short Selling Conference.
Jillian McIntyre's Short Intelsat Presentation: Kase Learning Conference
We're posting up a series of presentations from the recent Kase Learning Short Selling Conference. Next up is Jillian McIntyre of 221B Capital who pitched a short of Intelsat (I). She runs a fundamental long/short equity fund, typically running 20% net short, typically focuses companies with poor corporate governance (Germany, UK, South Africa, Australia). Previously worked with Sir Chris Hohn's TCI Fund.
Jillian McIntyre's Presentation: Short Intelsat
- 50% downside in her opinion, only 7% short interest. $14bn of debt, $1bn run-rate of interest every year, negative cashflow
- Believes company is ripe for technology disruption and has a bad business model; needs capital ASAP
- Company is in satellite communications, provides signal broadcast to major networks, media companies etc. Mainly exposure to Latin America and Africa. Thinks there's some similarities to SunEdison (which they pitched back in 2015 which went bankrupt): levels of indebtedness & bad business model
- The recent hype surrounding 5G and the big spectrum auction in November has led to irrational exuberance as Intelsat is up almost 300% this year. Lot of hype around the potential for C band spectrum. Even if it's allowed by FCC, could take over a year to start to monetize it. She thinks the company will see disruption in its ancient satellite model. Lower-orbit satellites will be launched and are better and cheaper than Intelsat's much higher satellites. Lots of hype also around potential with 'OneWeb'
- Co has very complex debt structure and is a serial re-structurer: they think it breached covenants and will need to raise $400-500 million and worst case $1.5-2 bn. Don't think they have access to new revolving credit facilities. Thinks they have aggressive accounting regarding bad debt provision and amortization rates and reliance on future revenue
Embedded below is the video of Jillian McIntyre's presentation:
Be sure to check out the rest of the presentations from the Kase Learning Short Selling Conference.
Berna Barshay Short Ralph Lauren Presentation: Kase Learning Conference
We're posting up a series of presentations from the recent Kase Learning Short Selling Conference. Next up is Berna Barshay of Viola Capital Management who pitched a short of Ralph Lauren (RL).
Berna Barshay's Presentation: Short Ralph Lauren (RL)
- Consumer specialist. Industry ripe with disruption.
- 80% of household purchase decisions made by women, 80% of investment choices made by men
- Ralph Lauren in the middle of attempted turnaround: Co has lost 19% of sales last three years. Why? Historically positioned as an upscale brand, they over distributed (discounting, margin pressure). Longtime COO departure led to disruption. Trying to now pullback on promotions and try to reach a new, younger customer. Stock up 70% in last 9 months, she's more skeptical on turnaround attempt and speed at which it would happen.
- In the age of Instagram, brands can't control their story as much. RL is too focused on North America. Department stores in secular decline. Trying to replicate Coach merely by reducing points of distribution
- Ratio of outlets to full price stores is out of whack and is a challenge to elevating the brand back up. Co is also omnipresent in the 'off price' channel. TJMaxx and Marshall has a lot of inventory and continued to grow. The difference between the $89 polo shirt at their flagship store wasn't that much different from the $35 polo shirt at TJMaxx. RL has devalued their signature item and devalued their brand in the process. This will be a headwind in the brand elevation efforts.
- Co wants to update the product and modernize the brand: does this alienate the core customer they have? Tough to straddle. It's a preppy, country club look that's been around since the 70s. Millennials and younger have much different street style
- She talked to 200 Millennials about favorite clothing brands and received a wide array of responses: RL hardly on the radar, lots of newer brands, niche brands, etc. Barriers to entry in clothing have come way down. RL did much better with men than women in survey.
- Near-term return to topline growth is nearly impossible due to off-price channel and department stores in secular decline. Trading at 18x like a luxury goods stock but needs to show tangible results
- Brand turnaround takes years and thinks that while expectations are low, still thinks estimates are too high. Upcoming investor day could be a catalyst. Thinks earnings will be flattish for next 2 years. N. America growth will be down 4%, 11% earnings miss. Thinks it should trade around 13x, for 30% downside though it's not a valuation short
Embedded below is the video of Berna Barshay's presentation:
Be sure to check out the rest of the presentations from the Kase Learning Short Selling Conference.
Gabriel Grego's Short Folli Follie Presentation: Kase Learning Conference
We're posting up a series of presentations from the recent Kase Learning Short Selling Conference. Next up is Gabriel Grego of Quintessential Capital who pitched a short of Folli Follie. (Please note that since presenting earlier this month, the stock traded down 70% and was subsequently halted.)
Gabriel Grego's Presentation: Short Folli Follie
- Co has 1.3bn euros of sales, trades on the Greek exchange, products are watches, purses, mainly jewelry etc. 70% of revenue and all profit originates in Asia, mainly China. Now investing into the United States
- Actual sales and profitability are less than accounting suggests. Business is shrinking rapidly, they are worried about potential insolvency
- Called 630 stores, they only found 289 open... nobody answered or store was closed. Out of 248 supposed stores in Asia, they only found 64. Hired Chinese and Japanese teams to do due diligence in the countries. Went to visit stores, found many were tiny, non-existent or liquidating
- Claims solid online sales, but traffic is tiny compared to big competitors who supposedly generate similar revenues. Social media has a tiny presence as well compared to others
- Thinks the company will have to issue shares or bonds to makeup for a shortfall soon
- Company claims $1 billion of sales in Asia, but actual China subsidiaries are only showing millions of dollars. Company has always used the same auditor then suddenly switched to another auditor that's not really as well known
Embedded below is the video of Gabriel Grego's presentation:
Be sure to check out the rest of the presentations from the Kase Learning Short Selling Conference.
Enrique Abeyta Short Anheuser Busch Inbev Presentation: Kase Learning Conference
We're posting up a series of presentations from the recent Kase Learning Short Selling Conference. Next up is Enrique Abeyta who pitched a short of Anheuser Busch Inbev (BUD).
Enrique Abeyta's Presentation: Short Anheuser Busch Inbev (BUD)
- Thinks there will be negative earnings revisions. Craft brewers are a threat, but contract brewing and the lower hurdle to entry in the market is the bigger story: it costs very little to start up a tiny beer somewhere and start producing.
-While most legacy beer companies built their advantage via scale and advertising via expensive mediums (TV, print) today advertising costs have come way down via online advertising and you can target the exact type of customer you're looking for.
- Also thinks Kraft Heinz (KHC) and Disney (DIS) will face similar threats and would be short those as well (KHC: lots of micro brands starting ot popup, DIS: cost of producing content is coming down and others can do so much more cheaply)
Below is the video of Enrique Abeyta's pitch on shorting Budweiser:
Be sure to check out the rest of the presentations from the Kase Learning Short Selling Conference.
Monday, July 17, 2017
Whitney Tilson's Presentation on Alphabet and Facebook
Whitney Tilson of Kase Capital Management gave a presentation at the 14th annual Value Investing Seminar in Italy on two stocks: Alphabet (GOOG) and Facebook (FB).
Tilson starts by doing a bit of a post-mortem on a call he made against Google some time ago. He points out that the company enjoys a flywheel of network effects and economies of scale: large user base > large advertiser base > better monetization > most R&D dollars > best product > high barriers to entry.
That's obviously not anything new, but he points out that valuation isn't crazy at 28x 2017 EPS and 13x EBITDA estimates given that the vast majority of incremental ad spending is ending up on GOOG or Facebook's platforms. And if you back out GOOG's cash ($126 per share) and 'other bets' ($50 per share), you get a valuation much more in line with the S&P for a company that he says is "vastly superior" to the average corporation.
On Facebook (FB), Tilson points out the company has higher margins than GOOG, and revenue growth is higher as well.
Embedded below is Tilson's presentation on GOOG and FB:
You can download a .pdf copy here.
Monday, April 10, 2017
Kase Capital Short Wingstop Presentation
Whitney Tilson's hedge fund firm Kase Capital has released a slide deck on its short position in Wingstop (WING). This is Kase's largest short position.
He notes that while the company is growing rapidly, the stock's valuation is "absurd", trading at 52x trailing EPS and 29x trailing EBITDA.
Tilson points out that same store sales growth is decelerating and the company's gross margin has also declined significantly.
Embedded below is Kase Capital's presentation on why they're short Wingstop:
You can download a .pdf copy here.
Friday, September 23, 2016
Berkshire Hathaway Symposium Panel Videos
The Museum of American Finance has posted videos of the Berkshire Hathaway Symposium Panel. It features Jason Zweig moderating a discussion between Tom Russo (Gardner Russo Gardner), Paul Lountzis (Lountzis Asset Management), and Whitney Tilson (Kase Capital).
The panel examines topics such as: what's the best advice you received from Warren Buffett? What are the flaws in the Berkshire model? Why did you buy Berkshire Hathaway stock? What aspects of Berkshire Hathaway can be emulated? And then audience Q&A.
Embedded below are the videos from the Berkshire Hathaway Symposium Panel:
What's the best advice you received from Warren Buffett?
What are the flaws in the Berkshire model?
Why did you buy Berkshire
Hathaway stock?
What aspects of Berkshire Hathaway can be emulated?
Audience Q&A.
Thursday, November 12, 2015
Notes From Berkshire Hathaway 50th Anniversary Symposium: Klarman, Ackman & More
The Berkshire Hathaway 50th Anniversary symposium just took place and featured conversations with the likes of Seth Klarman, Bill Ackman, Tom Gayner, Byron Trott, Carol Loomis, Roger Lowenstein, Tom Russo, John Phelan, and Whitney Tilson. The notes were compiled by Jacques Romano, MD.
Notes From Berkshire Hathaway 50th Anniversary Symposium
Carol Loomis (CL) and Byron Trott's (BT) Conversation
Warren Buffett (WB) was invited but he graciously declined explaining his presence would change the nature of the discussions. BT met WB because the GS partner that had handled his account, Tom Murphy, Jr., had retired. Hank Paulsen told Warren that BT was the only guy for him. Initial one hour meeting lasted about three hours. This was in early 2002.
WB created through GS a negative coupon convertible bond of about $300 million called SQUARZ in April 2002, whereby he was paid to borrow money and the institutional holder of the security was able to purchase Berkshire Hathaway (BRK) stock in the future at a higher price. Charlie didn’t like the idea.
BT represented Pritzker in the Marmon deal and was involved with MacLeans and Pampered Chef transactions. BT also involved in Wrigley and Mars deal.
BT describes WB as a perfect ten times two. He has an incredible mind and able to do math in his head and his discipline is incredible. On the human side, he is humble and has the best sense of humor. He is someone you want to be with and is always positive about anyone.
Regarding discipline, he cited some KKR transaction that WB could have done for 10-15% more in price while having a cheaper cost of capital but WB felt he could use that cash more effectively at another time. He waits for his pitch. “You should see the stuff he turns down over the years”.
WB looks at cash on cash returns and doesn’t factor in leverage. He looks for durable long lasting cash flow stream businesses. He realizes that sometimes to get great businesses you have to reach but he is incredibly disciplined and completely unemotional.
WB told BT that CL started as a reporter but is great in accounting and finance and is a stickler for details. She’s from Missouri. CL expanded on a vignette about her dating Ty Cobb. She had come to NYC in 1950s and was on the quiz show Tic Tac Dough where she did well and was subsequently contacted by Ty’s nephew for an invite by Ty to the 21 Club. “How could a baseball fan turn that down?” She was his subsequent “date” to Yankee Stadium during an Old Timer’s Game where she was presented with a Mantle, Maris, Whitey Ford autographed baseball. That’s about where it went. She was in her late 20s and he was in his late 60s.
In 2008, Goldman Sachs was experiencing a small but daily run on the bank and wanted to raise capital. BT said it was about a 20 minute negotiation with WB. In addition to making his BRK investment, WB wanted to make a big statement about being confident in that investing climate. He subsequently made his GE investment and wrote his Oct. 2008 NY Times op-ed. One of his points was that markets go up first and that there is reasonable cause to regain confidence.
WB is an American icon. The world doesn’t understand how important WB was to the solutions during the financial crisis of 2008. I would describe him as a “pragmatic optimist grounded in reality”.
Hank Paulson told BT that during a late night phone call, it was Warren’s idea to make TARP capital attractive to banks and for it not to be stigmatized so all the banks should receive it and none look particularly weak or strong. But he also wanted to make it more expensive for the banks if they kept this capital for a longer period.
WB was doing this to help the country. Some may be cynical about this because he owned Wells but Hank knew and everyone else who knows WB knew that he was creatively playing a constructive role.
Warren is disciplined, opportunistic and long term. Charlie is not my number two; he is my equal and has kept us on the straight and narrow. Warren doesn’t want to do small deals but will do minority deals as long as it is big.
Warren’s the greatest, nicest and most accessible person. He’s a great teacher and a great student of investing and business. He provides a safe home for business owners that want liquidity and still passionately want to run their businesses. Warren is one of a kind and will be the best investor of all time and his record will not be beaten.
He thinks very long term and Berkshire will still be intact a century from now. “Warren, you can’t control things from below the ground.” “Maybe not, but I can try.” The term “investor” is not quite expansive enough to describe Warren. He’s also a great acquirer, manager and owner of businesses. Matt Rose of Burlington Northern told me that Warren knows more about the railroad now than I do. And he can interconnect it to everything else. He makes the complex seem simple. When I talk to Warren, I feel like I’m 2 steps behind him.
They discussed how Andrew Carnegie is known more now as a philanthropist than as a businessman and Warren may have similar impact and be known more expansively.
Seth Klarman (SK), Bill Ackman (BA), and Roger Lowenstein's (RL) Conversation
Bill went to Larry Cunningham’s Cardoza symposium in 1996 and fortuitously sat next to Suzzie Buffett who invited him to sit next to Warren at lunch! When he went to HBS, there were not any classes in investing although there were classes in investment management. There were no investment clubs at that time either. He read Graham’s Intelligent Investor and then Warren’s annual reports.
Seth Klarman took a job at Mutual Shares after college and “Warren” was common parlance once I got into the business. He thought Warren’s Superinvestor article was very logical. SK feels that there must be some type of gene that makes people have an affinity for value and value investing. He told a story about a friend of his whom enthusiastically tried value investing full time but three months later ended up quitting: “It doesn’t work”.
BA says some of the things he tries to emulate are Buffett’s focus on quality, durability and concentration. Although given “my” experience in Valeant, perhaps I should change one of his aphorisms to “be fearful when others are fearful”.
Making good investments is not about performing discounted cash flow analyses or reading footnotes but more about assessing the moat in our dynamic world. Many of Buffett’s investments in the 1970s like encyclopedias and newspapers did not hold their advantages. You can’t “just buy and hold”. The world has changed rapidly.
The difficulty is the qualitative assessment and the implementation. Railroads now seem to pass the 100 year test but how many businesses can pass that test? Lowenstein made the point that Wall Street loves those 99:1 bets but not WB.
SK said that the maxim of “don’t lose money” does not mean at every time and in every instance but to the extent that it puts you out of business. Sometimes you can bet or invest in favorable expected value situations where you lose the bet. This is similar to an insurance operation. Some investments in a portfolio will lose but you don’t put the operation at risk.
SK: In the 1980s you could actually buy quality inexpensively; you didn’t have to pay up. I remember Nabisco selling for 7 times after tax earnings. You can’t just kneel at the temple of Graham and Dodd, you and the world will change. We will evolve and ought to evolve because the world requires us to. WB teaches us how to make our own map.
I don’t know WB well enough to know how he feels, but I suspect that he feels that him being held as an investing demigod is a bit silly. WB isn’t about that. WB is not about giving you a formula. “Business is hard. Everything is overlaid with judgment”. WB has been fortuitous to invest at a time when you could get quality inexpensively. He has built on certain advantages. No one else gets the calls that he gets. Some people are overly focused on him as opposed to understanding how he thinks.
BA: Buffett has made more people rich than anyone else in history. And he gives it all away. He’s one of the great educators. I believe in response to a questioner, BA went into a diatribe about Coca Cola (KO). It does enormous damage to society and people consume too much sugar contributing to obesity and diabetes. He wouldn’t be against supermarkets that sell coke. And he owns Mondelez: all things in moderation. But Coke doesn’t seem to have had a bad effect on Buffett. I believe he has said WB hasn’t had water since the 1950s! He thinks Coke has great distribution and marketing but it is not good for children to get too much sugar water.
There was some discussion that the BRK model with insurance, concentrated positions and possible illiquidity may have problems in future. You need to be a fortress and inspire confidence and trust with regulators. Will that survive Buffett? Conglomerates do not have a great history.
Buffett is a fabulous communicator. He has stayed on the right side of politics and has avoided becoming a target of Washington. It is not automatic that the next CEO will be able to tell the story of the company as well. SK said he stole the idea of writing meaningful partner letters from WB. And he feels that the overall quality of fund letters in general has improved because of Buffett’s lead. Consistency, reassurance, and transparency give shareholders comfort.
BRK can be a Warren centric model. He is uninvolved in the management of the businesses and there may be an opportunity for “optimization”. With 3G he is “outsourcing” the less attractive aspects of the business. Catastrophic risks can destroy enormous amounts of value.
SK: excessively raising prices on drugs may not be illegal but there are social costs. Capitalism may face a more constrained environment as a result of bad behavior. WB has conducted himself generally beyond reproach. He has not become a target. The next CEO may not get a pass so easily. Value investing is nuanced but we will always have it. “Human nature will not yield”. Greed, fear and lack of intellectual honesty will result in bargains from time to time. There is always going to be a share of the investment business that is following the crowd. There are those watching over their shoulder and who have misalignment of goals. They may be forced to do things they may not want to do for human reasons.
Someone asked SK if he wanted to be an investment manager at BRK or if he had any discussions about this with WB. He said he was never a candidate and loves his job. He said he was surprised on the upside with WB’s decisions about investment managers. It was hard to do and it has gone incredibly well.
Berkshire Shareholder Panel: Tom Russo, Paul Lountzis, Whitney Tilson
“Only WB can fill a room without even being in it”.
Whitney Tilson has been adding to his BRK position. It is safe, cheap and with decent growth. He puts fair value about $267,000 give or take 10%. You can find his slide presentation on the Internet (there were no slides at this conference).
Tom Russo said there are no agency costs and an extraordinary alignment of interests. WB owns 30% of the stock and makes $100,000 for managing. The corporate form allows for tax efficiency with respect to capital allocation. He has the willingness to do anything if it makes sense and the capacity to do absolutely nothing if conditions warrant. Great businesses can find a home at BRK where they will be protected.
Paul Lountzis tries to understand BRK broadly and deeply. There is embedded optionality in BRK. Regarding Berkshire, he is reminded of the Ralph Waldo Emerson quote: “Every institution is the length and shadow of one man.” We try to understand it now and in the future. He mentioned that Geico is on the books for $2-3B but is worth 10-15 times that.
WT told WB that he is his role model in Jan. 1999 and he tries to emulate how he runs the business. Given how WB communicates, BRK is the opposite of a black box. He has incredible humility and even looks for ways to self-flagellate.
PL: WB is a wonderful human being and exemplifies consistency and loyalty to a high degree. He focuses on permanence over the long term and looks out 10-20 years. His example impacts everything you do both personally and professionally. BRK values permeate seamlessly and consistently throughout its business. Despite the fact that BRK has gone down by 50% several times it has still been extraordinarily rewarding.
Few businesses have great reinvestment opportunities. If you can defer taxes on unrealized gains, this is a great advantage. The problem with many public companies is their inability to take advantage of some of their potential opportunities, unlike family controlled companies. Public companies may need to make earnings estimates as opposed to investing in opportunities that may penalize current earnings. They may worry about activists.
BRK is a unique public marriage between private and public investments. BRK gets $1.5B month in free cash. It is effectively a source of permanent capital and a robust re-investment engine. During times of stunning market drops, WB was never forced to sell. Permanent capital is very valuable. The ability to do nothing is valuable in the investment business. Operationally, they can turn down the noise of Wall St. Buffett has the flexibility to do nothing. He is unique and special and combines analytical strengths with strong people skills to a degree that is very rare. He has unique qualitative insights. You don’t see the 99% of opportunities he says “no” to.
Buffett plays a very important cheerleading role. Many company CEOs are rich and old and feel personally loyal to Buffett. Are they going to be as loyal to the next CEO? There is somewhat limited corporate governance but Buffett holds it all together.
What is the next BRK? The best BRK is BRK. One interesting point that was made: investors that held the S&P 500 going into the financial crisis more than likely sold when everyone was running for the hills. But given their understanding of and loyalty toward BRK, shareholders were much more likely to garner the full return of the company and not otherwise sell low and buy high. This is a point that can be missed when one compares BRK returns to the index. The index’s returns are more likely illusory and less likely realized. Other companies “wave people in at the peak”.
Partnership Session With Markel's Tom Gayner and John Phelan
John Phelan. We don’t take 1% or more positions without visiting the company. Should you locate far from Wall St? Mindset trumps location. We think we have semi-permanent capital. There is always a balance between the short term and long term. Our benchmark is not the S&P 500. Our benchmark is to make money. The risk free rate is your benchmark. We have the luxury of not being invested all the time. Simplicity is a virtue and we have fewer problems that way. If you hire someone that is not from a top school, they are less likely to think, “You’re lucky to get me”. Some of our best hires are from the military. They know how to get things done. We currently have 18% cash which is on the high side. We are company focused and not market focused.
Tom Gayner: “Good meat priced right is better than poor meat priced cheap”. JP worries about the credit markets. Now a $250M 10 year Treasury trade moves the market whereas before $1B wouldn’t make it blink. We are defensively positioned but not bearish on the US economy. We are seeing wage pressure in our companies. The best hedge is a great attractively priced business. Paying up for a business is counter-intuitive. It costs more but may be worth a lot more.
Lawrence Cunningham: Buffett’s presence here would steal the stage and by electing not to come, he is letting us have the conversation. LC organized a conference at Cardoza Law School in 1996. One questioner asked what happens to the shareholders when Buffett dies. Buffett said, “it won’t be as bad for you as it will for me!” BRK looks a lot different today than it did then but the core values have stayed the same. He has created an institution that goes beyond him in the quality of the people, businesses and values and that is the best succession plan possible.
BRK gets funds from internal generation and insurance float versus the cost of borrowing to make acquisitions. The float is currently $85B with no due dates, covenants or banker negotiations.
The Board is not there to monitor management but to partner with it. They have no options, liability insurance and bought stock with their own cash. Company CEOs have clear and simple mandates. Called out Bruce Whitman, CEO of Flight Safety who was at the conference. He has never sold a subsidiary and sometimes business sellers accept a discount compared with offers from other business buyers. We would rather bear the visible costs of a few bad decisions than suffer under stifling bureaucracy.
GenRe would have gone bankrupt after 9/11 without BRK! Dexter Shoe was another “mistake”. BRK sometimes is a juicy target for journalists-recently Clayton Homes and National Indemnity.
He spoke about a recent acquisition called Detlev Louis from Germany that sells motorcycle gear. Similar to See’s being a small deal but defining the future of the company, he sees this company as a possible harbinger of future deals in Europe. He points out that it only has about $40M in earnings which is less than WB’s minimum size but he made an exception to get a toehold in Germany and Europe.
He made mention that Pampered Chef’s sales have considerably decreased and that there is some turmoil in the capital intensive business of NetJets.
Don’t focus on beating the market but in finding the greatest discrepancy between price and value.
Tuesday, March 3, 2015
Lessons From a Dozen Years of Short Selling
Many investors have called short selling one of the most difficult things to do in finance. There's potential for unlimited losses, the position sizes get smaller if you're right, and you're constantly going against the crowd and battling waves of optimism.
Kase Capital's Whitney Tilson has put together a presentation entitled, "Lessons From a Dozen Years of Short Selling" that he delivered at Columbia Business School.
In it, he presents both sides of the argument, listing 12 reasons not to short and then 10 reasons to short.
In a recent interview, Tiger Management's Julian Robertson said that it's hard to run a hedged portfolio in a market that seemingly only wants to go up. But even in an ever-rising market, there will always be frauds and fads, and more often than not, that's what short sellers target.
Embedded below is the full presentation on shorting.
You can download a .pdf copy here.
For more on the subject, we've also posted up another hedge fund manager's take on short selling.
Monday, February 2, 2015
The Art of Value Investing: Talks at Google Presentation
John Heins and Whitney Tilson published a book a while ago entitled The Art of Value Investing: How the World's Best Investors Beat the Market. It's basically a compilation of great quotes from tons of prominent hedge fund managers about a variety of topics on investing.
Featured as part of the Talks at Google series, the two gentlemen gave a presentation at Google about the book, investing, and a look at Google stock as well.
Embedded below is the video of The Art of Value Investing at Talks at Google:
If you haven't read it, The Art of Value Investing is a great book full of wisdom from a ton of investors that have been featured on Market Folly over the years.
Wednesday, September 10, 2014
Whitney Tilson's Value Investing Congress Presentation: Short Exact Sciences (EXAS)
We're posting up notes from the 2014 Value Investing Congress in New York. Next up is Whitney Tilson of Kase Capital who presented various short ideas.
Whitney Tilson's Value Investing Congress Presentation
Presentation has 4 parts: lessons from a dozen years of short-selling, update on 2 short ideas (LRN and LL), and a new short idea (EXAS)
Why short-sell?
Insurance (but made for painful 2013-14): pays when you need money to buy cheap good companies in big declines
Plentiful opportunities now (shortsellers run out of town: shops closing, long only launches)
Can make money
Can provide funds to buy more longs
Keeps him from messing up the longs
Big rush from winning/intellectually satisfying
Most HFs are expected to short
Finding ideas:
- Other short sellers
- Conferences
- VI Insight, VI Club, Seeking Alpha, SumZero, Activist Shorts, Citron, Screens
- Media (look for hype)
Right now seeing incredible shorting opportunities
Be very diversified: has 50 shorts now
Offset longs and shorts (match cap/industry and the way they trade: tough to run long PG BRK and short volatile small names)
Lesson: stock follows earnings = reported results have to start showing cracks (example MBIA took a while)
Lesson: avoid "beat and raise" names = runaway trains (examples PCLN TRIP FB LNKD)
Lesson: be patient, wait for a break (example shorting CROX too early)
Lesson: look for Titanics, mortal damage but taking a while to sink (LRN, NSR, HLF, WRLD)
Lesson: look for obvious bubbles (3D names, PLUG, Ballard, SaaS, biotechs)
Update on K12 (LRN) Short
Losing their largest EBITDA contributor in PA (downgrade this morning)
Likely- per his contacts- to lose several other contracts in the next 1-1.5 yrs
Doing bad things, like enrolling no-shows and billing
Still overvalued
Update on Lumber Liquidators (LL) Short
Still many ways to win
Business performance is poor (dropping SSS)
There might be news on the formaldehyde end (not in deck)
New Short Idea: Exact Sciences (EXAS)
New colon cancer test: essential to detect early
Company has long history of failure, the new test is FDA approved
The "superior" results were rigged
Essentially a binary outcome based on reimbursement rate decision
Even if high price approved, it will fail in the market = requires filling up a cup with excrement vs. just swipe
New technologies coming (ie pill cameras)
Q&A: Why short at all? Munger quote from a private meeting "every guy has to learn for himself [not to short]"
Q&A: Are you still in CALL? Yes but two Qs of bad prints so less enthusiastic now.
Q&A Options? "Options are heroin. They feel so good and they kill you." Now only two positions, LT ITM call on CP, defacto a stock position. Puts in IOC.
Q&A: VIPS? Got in at 80, covered at 120. Analyst called him after a visit in China: it is a real business and it grows at the rate chinese internet cos are growing, nothing suspect.
Q&A: IOC: not a great short now because of the Total partnership. Will take a while to see if the gas is extractable, Tilson does not think so.
Be sure to check out the rest of the Value Investing Congress presentations here.
Monday, April 7, 2014
Whitney Tilson's SodaStream Presentation: Value Investing Congress Las Vegas
We've posted up notes from the Value Investing Congress in Las Vegas and next up in the series is Whitney Tilson of Kase Capital who pitched long SodaStream (SODA).
Whitney Tilson's Value Investing Congress Presentation
• SodaStream (SODA): Home beverage carbonation system – makes money off the machine, the bottle, the carbonation and the syrup. The carbonation and syrup lead to repeat sales. Razor/blades model.
• 70% cheaper once you purchase the machine. 25 cents per carbonated liter. 30% cheaper if you add flavor versus other products. Convenience – you don’t need to carry around bottles, etc.
• A lot of choices flavor wise. Environmentally friendly.
• Target market? People who like to drink sparkling water. Households with multiple people – flavoring or the soda drinker in the household.
• It is NOT competing against coke and pepsi – they do sell coca-cola variants, but in Whitney’s experience, not the best taste – however the other flavors taste good and are popular.
• SODA looks like Decker’s to Whitney.
• Beaten down stock – has fallen tremendously, with a high short interest.
• Mistaken view that it is a fad – United States don’t realize the business has a strong share overseas, only 1-2% share in the USA. 393 people surveyed for SodaStream – people love their SodaStream machines and use / recommend them frequently.
• Are the problems fixable? USA sales growth is decelerating – believes it is temporary, due to the worst holiday selling season and 16% growth isn’t bad! In the second half of FY13, brought on with Wal-Mart. Plus, marketing and ad spend didn’t deliver. Europe as a matter of point grew 38% YoY. Secondly, SODA did not deliver on gross margins. Missed margins on machine sales as they wanted to get machines out to consumers – drive unit growth for the consumable business (syrups/carbonation). Whitney believes this was worth the cost.
• Enormous Global Market: a lot of white space for future growth and market penetration.
• Position of Market Leadership : SODA owns the market, no real competitors. Large active user base.
• Attractive economic characteristics : 50% gross margins, not capital intensive, decent profit margins. Healthy balance sheet. Further, attractive growth opportunities, YoY growth story for the past years. Flavor is the highest margined business (margins are not broken out). In Switzerland a mature market, 80% of sales or more are CONSUMABLES – 25%+ operating margins. USA generates 5% operating margins give or take, due to machines as a mix of sales.
• Moat? Co2 cartridges require expertise and reverse logistics as many countries consider these items dangerous, large installed base, industry know how and the brand name.
• Samsung one example of a company that is partnering with SODA stream to install in their refrigerators.
• Valuation – doesn’t look cheap, trading at 22x trailing earnings guidance is for 3% growth, EBITDA growth ~15%. Looks exp. On a PE basis, fairly valued on EBITDA basis. Why is this cheap? Brings up the GoodCo / BadCo example. You should look at the businesses separately.
• Western European business – 31% growth last year, 33% previous – their cash cow mature market. Thinks they earn 2.34 a share out of Western Europe (versus 1.82 total business). 15x multiple on that business ~$35 or roughly the entire share price today. You get the USA biz for free. • Another way is to look at the refill business – 7mm installed base, trading around ~8x refill business.
• Doesn’t think the Coke/Keurig Cold competition – no product out yet. Chemical carbonation isn’t on par with the later, plus costs are expected to be higher.
• If you want a cup of coffee you have to make a pot – a waste, so Keurig makes sense. If you want just a coke, you can purchase a can or go to a vending machine, what is the value add from Keurig Coke? Doesn’t make sense to Whitney.
• What could go wrong- poor earnings next quarter and inventory levels. Q1 earnings will be bad, perhaps it will offer a better entry point.
Be sure to check out the rest of the Value Investing Congress presentations.
Wednesday, September 18, 2013
Whitney Tilson Short K12: Value Investing Congress Presentation
We're posting up notes from the 2013 Value Investing Congress in New York. Next up is Whitney Tilson of Kase Capital. He presented a short of K12 (LRN).
Whitney Tilson's Value Investing Congress Presentation
-->
Be sure to check out the other presentations from the New York VIC here.
Thursday, August 8, 2013
The Art of Value Investing: How the World's Best Investors Beat the Market (Book Review)
Today we're reviewing the new book, The Art of Value Investing: How the World's Best Investors Beat the Market by John Heins and Whitney Tilson. These two have aggregated an entire book full of quotes and anecdotes from top hedge fund managers over the years.
The Art of Value Investing: Book Review
MarketFolly.com
exists primarily to track hedge funds, examine why they're
buying/selling certain stocks, and to learn from great managers. After
all, investing is a continual education.
While learning
from your own mistakes is one way to improve your investment process,
it can also save you a lot of aggravation and money to take the time to
learn from others who are willing to share what they've learned as well,
and that's exactly what this book does.
The Art of Value Investing
makes you feel as if you're sitting at a giant table full of some of
the best investors today. A topic of investment process is opened for
discussion and everyone chimes in with their thoughts, all while you sit
there rapidly absorbing all that you can.
Chapters of the book include wisdom from managers on topics
such as: circle of competence, generating ideas, portfolio construction,
guarding against risk, and more.
Hedge Fund Managers Quoted in the Book
The list is quite extensive, but here's some of the bright minds that are quoted repeatedly in the book:
Seth Klarman (Baupost Group)
Howard Marks (Oaktree Capital)
David Einhorn (Greenlight Capital)
Jon Jacobson (Highfields Capital)
Lee Ainslie (Maverick Capital)
Julian Robertson (Tiger Management)
John Burbank (Passport Capital)
Mitch Julis (Canyon Capital)
Joel Greenblatt (Gotham Capital)
Jeff Ubben (ValueAct Capital)
James Crichton & Adam Weiss (Scout Capital)
Larry Robbins (Glenview Capital)
Ricky Sandler (Eminence Capital)
Bruce Berkowitz (Fairholme Capital)
Thomas Gayner (Markel Corp)
Prem Watsa (Fairfax Financial)
And that's just a few of the big names. Tons more established and up and coming managers divulge their experiences in The Art of Value Investing.
Quote from the Book
We asked the authors for some of their favorite quotes from the book, and they sent one from David Einhorn on page 107:
"We
take the traditional value investor’s process and just flip it around a
little bit. If you’re looking for something that’s cheap, you’ll
probably do a variety of screens—on price‐to‐sales, price‐toearnings,
price‐to‐book, whatever—to identify stocks that appear to be
inexpensive. Once you have that list, then you start to research if
there are good reasons the stocks deserve to be cheap, or if maybe
there’s an investment opportunity because they’re cheap without a good
reason. We think that’s the way most value investors approach it.
We
never do screens like that. We start by identifying situations in which
there is a reason why something might be misunderstood, where it’s
likely investors will not have correctly figured out what’s going on.
Then we do the more traditional work to confirm whether, in fact,
there’s an attractive investment to make. That’s as opposed to starting
with something that’s just cheap and then trying to figure out why. We
think our way is more efficient."
High Praise From Other Hedge Fund Managers
This
is a fantastic book for any investor, whether you're a beginner or a
professional. Don't take our word for it, though. Here's what Omega
Advisors' Lee Cooperman had to say about The Art of Value Investing:
"They
have provided in one publication invaluable insights from some of the
most accomplished professionals in the investment business. I would
call this publication a must-read for any serious investor."
Pershing Square's Bill Ackman also praised the book:
"(The
book) is a thoughtfully organized compilation of some of the best
investment insights I have ever read. Read this book with care. It
will be one of the highest-return investments you will ever make."
Highfields'
Jon Jacobson called it a "must-read" and ValueAct Capital's Jeff Ubben
said that, "The lessons are like scars and they are revealed here
firsthand."
If you enjoy reading MarketFolly, then you'll love soaking up the wisdom from The Art of Value Investing: How the World's Best Investors Beat the Market. It's like having your own archive of the minds of some of the most talented managers in the game.
Wednesday, May 8, 2013
Notes From Value Investing Congress Las Vegas 2013: Day 2
Yesterday we posted up some quick notes from day 1 of the 2013 Value Investing Congress in Las Vegas and today we'll highlight key takeaways from day 2 below:
Whitney Tilson, Kase Capital: AIG, Hertz (HTZ)
He
talked about how American International Group (AIG) is still a position
he likes as it's still cheap and the company has been streamlined to
something much easier to understand and there's been a lot of
advancement since the financial crisis and even since last year. It's around 14% of his portfolio and was his largest position as of last month. Tilson also likes his long of Berkshire Hathaway (BRK.A / BRK.B) and recently adjusted his intrinsic value figure to just north of $193,000. Additionally, he mentioned he's started a new position in Hertz (HTZ) and you can read the pitch on Hertz in this newsletter that convinced him.
Guy Gottfried, Rational Investment Group: WPX Energy (WPX)
His pitch was on WPX Energy, a spin-off from Williams Companies last year. He says it trades at 8x free cashflow and .66x book value. Gottfried feels it's a very cheap stock for a play on natural gas that doesn't require gas prices to head higher.
Mark Boyar, Boyar Value Group: Weight Watchers (WTW), Dole Foods (DOLE), Western Union (WU)
He thinks we might be in the midst of multiple expansion. Boyar likes Weight Watchers (WTW) as a play on the weight management industry and notes it's down 50% over the past 12 months. He also pitched Dole Foods (DOLE) as the company reduced its debt load by selling the packaged foods business. His third and final pick was Western Union (WU).
Vitaliy Katsenelson, Investment Management Associates: Whistler Blackcomb (WB.TO)
He said that profit growth is slowing down and that the market is actually getting expensive on a P/E basis. Katsenelson argued that there's no secular bull market, at least not yet. In the mean time, he likes stocks with solid dividends and says that the vast majority of returns in sideways markets are derived from dividends. He's the author of The Little Book of Sideways Markets, by the way. His pick was a high dividend payer (over 7%) in Whistler Blackcomb, the owner of the popular ski resort. He likes their lower costs due to no property development etc.
Zeke Ashton, Centaur Capital Partners: Fidelity National (FNF), First American (FAF)
He emphasized the importance of learning from mistakes. While you will encounter your own mistakes as an investor, it's also easy to learn from others' mistakes too. Ashton argued that emotional mistakes are much more prevalent than analytical ones and so obviously behavioral finance is an important part of investing. As far as current opportunities in the market go, he's having a hard time finding good ones as so many shares have been bid up. He's not a big fan of homebuilders but if you want a play on housing, he said to look at the title insurers as a proxy with lower risk. His picks were Fidelity National (FNF) and First American (FAF).
Joe Altman & Chris Kyriopoulos, COMPOUND Capital: TARP Warrants, Nathan's (NATH)
They launched their fund at a hell of a time: during the financial crisis when Lehman Brothers failed. These two mentioned that they like TARP warrants, which we'd note has been a hedge fund favorite (especially AIG and BAC warrants, though Compound prefers AIG and COF ones). They note these are liquid plays that are often underfollowed. However, their pitch today was Nathan's (NATH), the popular hot dog proprietor.
David Hurwitz, SC Fundamental: Long KISCO, Short Salesforce.com (CRM)
He pitched one long: KISCO in Korea (001940.KRX) and one short: Salesforce.com (CRM). He says KISCO is much cheaper than CRM.
Chris Mittleman, Mittleman Brothers: Revlon (REV)
He pitched this as a turnaround story, praising management for a good effort. Ron Perelman owns a ton of the company and that's partially the reason it's so cheap. Mittleman likes that it's essentially a recession resistant business. A solid portion of their revenues come from Walmart. He also mentioned Carmike Cinemas (CKEC).
Ori Eyal, Emerging Value Capital: Hilan Tech
Eyal talked about the opportunities to invest in Israel, somewhere he specializes in (launching the Emerging Value Israel Fund). He says the country is stable and pro-business and has a growing economy. He pitched Hilan Tech, which he dubbed the 'ADP of Israel.' He says Israeli stocks on the whole are cheap as they've largely traded sideways the past few years.
Harris Kupperman, Mongolia Growth Group: Real Estate
He touched on how there's too many investors out there all doing the exact same thing (i.e. herding). One place that there certainly aren't many investors involved is Mongolia. He says the country's GDP will explode 10x over the next decade or so, creating a big opportunity and he recommended real estate there.
For more from this event, head to notes from day 1 of the Value Investing Congress.
Thursday, April 4, 2013
Whitney Tilson's Kase Capital Q1 Letter: Pitch on Deckers, Sears Hometown & Outlet Stores
The hedge fund duo of Whitney Tilson and Glenn Tongue split up last year and now Tilson is managing his Kase Capital solo. He just sent out his first quarter letter to investors where he outlines two of his new investments: Deckers (DECK) and Sears Hometown & Outlet Stores (SHOS), which you can read in the letter below.
Kase Capital's Top Holdings
In Kase Capital's letter, Tilson also lists his largest positions:
1. AIG (AIG)
2. Berkshire Hathaway (BRK.A)
3. Howard Hughes (HHC)
4. Deckers (DECK)
5. Citigroup (C)
6. Goldman Sachs (GS)
7. Netflix (NFLX)
8. Canadian Pacific (CP)
9. dELiA*s (DLIA)
10. Iridium (IRDM)
11. Grupo Prisa (B Shares)
12. Sears Hometown & Outlet (SHOS)
13. Spark Networks (LOV)
Tilson's Shorts & Exposure Levels
Tilson also reiterated a few stocks that he's short: InterOil (IOC), K-12 (LRN), and Nokia (NOK). He's also holding a large cash balance, waiting for better opportunities to deploy capital. His equity exposure comes in at 66% long and 22% short currently.
Embedded below is Whitney Tilson's Kase Capital first quarter letter to investors for 2013:
Monday, October 1, 2012
Whitney Tilson's 3 Favorite Stocks: Value Investing Congress
Continuing coverage, we're posting up notes from the Value Investing Congress. Below are notes from the presentation of Whitney Tilson of T2 Partners. His talk was entitled 'My Favorite Ideas.'
Tilson's 3 Favorite Stocks
1. Netflix (NFLX) - He was originally short, but now he's long. He says the company reminds him of Amazon.com (AMZN) back around 2001. He also feels it could be a takeover target.
"The most controversial, risky thing in my portfolio." Rallied 80% in first 6 weeks of this year.
Quick overview: only $3B market cap, 400M net cash, $3.5B TTM revenues, EV/rev trading at less than 1x sales, FCF TTM collapsed only $61M because company is reinvesting all of its profits back into the company. 28.3M subs, each EV/sub about $99. 28.7% short interest.
Bull case: market leader, in a global business that is growing 30-40% per year. Lots of talk about competitors, but no actual market share losses. Investing in better content, and international expansion which is losing money.
Using hulu as a comp, a $2B valuation on 2M subs, values it at $1000 per sub. Says downside protection due to "bite sized" acquisition for a half dozen companies that would find it attractive. "Mother of all bidding wars would erupt."
2. Berkshire Hathaway (BRK.A) - "Total opposite." Brief update: trading above the 110% of book level. Core operating businesses "are going gangbusters." Insurance up 65% this year, because last year had some super cat events.
How to value it? $106,700 investments per share, $8600 eps ex investments x 8 (12 p/e) multiple, get $175,500 intrinsic value, which is 32% up from today's price. Intrinsic value calculations have typically led the stock price a bit, but quite correlated.
3. Howard Hughes Corp (HHC) - His third largest position, after BRKA, and AIG. HHC owns 34 commercial, residential and mixed-use real estate properties in 18 states. It was a spin-off of the harder-to-value assets from General Growth Properties (GGP).
Real estate company with no income or dividend, so no natural investors for it. $2.7B market cap, $3.1B EV. Bill Ackman is chairman, insiders own 50% of stock, CEO bought $15M of warrants with his own money, not an option grant.
Owns: Summerlin residential in Las Vegas. 40,000 homes in the area, 5880 acres remaining to be sold. Woodlands in Houston. 3669 lots left. Not as bad as overall, they had their bubble much earlier. Ward Center in Honolulu. 60 acres, 1M sq ft of leasable space. "Unbelievably hot market in Honolulu." Could do 5-8 residential towers with ocean views. At peak, $18M/acre, they have 60 acres. South St. Seaport. #5 visited site in NYC, 11 acres, major development, worth about $200-300M now. They will tear down Pier 17 and replace it with a glass enclosed building, with panels that can open in the summer. Great views from the roof, they will build it.
Very hard to value, have to use a variety of methods based on the specific property. Low end, gets $67 (where it is now) and high end gets you $125 per share, almost a double. Also inflation hedge, hard assets. Risk is real estate market declines again. Need good execution.
For more from this manager, we've also posted up Tilson's presentation on AIG from the last conference.
Question & Answer
NFLX- will Apple stream? He says they seem perfectly content to just sell content, not at the unlimited fixed price. AMZN is a bigger threat, with their Prime offering. He says use the hulu example, which has gotten very little traction despite massive investment.
How are his funds ytd? "about flat" Strong 1st Q, especially with NFLX, but in hindsight, should have taken more money off the table. "Kicked the market's butt for 12 years, but gotten it kicked for last 2 years."
Macro Thoughts
Great Recession was worse than thought- for Q408, estimates were -3.8%GP, it has been revised to -8.9%! Consumer confidence still well below pre-crisis levels.
Job growth anemic, barely over the 150k needed to keep up with population growth. Unemployment fell from 10% to 8.1%, but still way above 2000 4% level. Job losses have been more severe than any downturn since the Great Depression, and the recovery has been weak. Lost 8 million jobs, 6% of all jobs, still 3.5% below late 2007 number of jobs.
Each recession has taken longer to recover, 1981, 1990, 2001 and now 2007 which hasn't recovered yet. Govt running biggest deficits since WW2. Over last ten years, median household income has declined slightly to $50.876. Reason the recovery is so slow? no residential investment, like we usually get. Private sector jobs strong, but government jobs are in decline. The story is tremendous weakness in housing spending and loss of government jobs.
Big picture summary: US has tepid recovery, little market upside unless the economy gets much better. Factors that could derail the recovery: Europe gets worse, US housing market turns down, China hard landing, sovereign debt crisis in Japan. Much more concerned about these 4 than the US.
In his talk, he pointed out that it's absurd to own 10 year
Treasuries at 1.65% when you can own high quality companies like Exxon
Mobil (XOM), Microsoft (MSFT), ADP (ADP), and Johnson & Johnson
(JNJ). Fidelity, the behemoth fund manager, now has more money in bonds than stocks. Massive mistake by investors by doing rear-view mirror investing.
Embedded below is Tilson's slideshow presentation from the Value Investing Congress:
Be sure to check out the rest of the hedge fund presentations from the Value Investing Congress.
