WealthTrack on Whitney Tilson and David Winters

CONSUELO MACK: Yes, we do. Whitney Tilson, you're more domestically oriented but you're not a buyer per se.

WHITNEY TILSON: We're doing more selling than buying. During this rally we've been trimming a lot of our longs in our hedge fund, adding to some of our shorts. And six months ago we were playing offense, today we're playing defense. The reason is twofold. One is valuations- if you look at the S&P 500, everyone uses different estimates, but the latest ones I saw, trading 19 times next year's earnings and 17 times the subsequent year’s earnings. And those earnings are pretty optimistic earnings estimates; analysts are assuming that corporate earnings return to peak levels only two years from now. And so even at those peak levels, it's trading at a pretty rich multiple, and secondly, we're very concerned that we're in for a long grinding recession. Armageddon is off the table I think, that's the good news. But the housing crisis, which has been really driving this recession, we think has many more years of abnormally high losses that's going to keep the financial system weak and keep our economy not necessarily on life support, but certainly far from robust.

CONSUELO MACK: But longer term, David, if you're, again, skating where the puck is and you're looking at the China market for instance, the China consumer, one of the things that Michael has been reporting on and other people as well is the reflation that's occurred in China, the incredible stimulus that's occurred, which is supposed to be very inflationary- are you concerned about a bubble developing in China? Is that something that’s on your radar screen?

DAVID WINTERS: Absolutely. I don't know what's going to happen, or really anybody else does. But I think the inflation issue is something that almost no one is talking about, and you have it right on the nose. That's why we like companies like Nestle, because kids of all ages have always liked chocolate bars. When I was a kid, a chocolate bar was ten cents. It’s a buck. In my lifetime chocolate bars have gone up ten times and you get paid 3.5% to wait and they've got all these other assets, so they buyback stock. So we look for companies that can grow all over the world. You can diversify your currency streams and you really don't have a lot of risk. There's this whole idea of market risk. But chocolate bars are not a risky place.

Full Transcript

Whitney Tilson: Berkshire Hathaway Credit Risk, Index Puts Are Overblown Worries

I’ve seen a lot of crazy things in my investment career, but I struggle to think of anything that tops this: Berkshire Hathaway’s five-year credit-default swap spreads have more than tripled in the past two months and now stand at 475 basis points (CDS quotes in this article are as of the end of day 11/19/08 and stock quotes as of 11/20/08), as this chart indicates (click charts to enlarge):

To get some perspective on what this means, the median CDS spread for companies with the lowest investment grade bond rating (BBB-) is 348 basis points, according to Moody’s, so the CDS market is indicating that AAA-rated Berkshire is junk! Or consider this chart, which shows that Berkshire’s CDSs are higher than a wide range of other financial companies [more than 4x Travelers, 3x JP Morgan Chase and well above Citigroup, even after Thursday’s stock collapse – the world has truly gone mad!]:

Full Article

Whitney Tilson and Andy Kilpatrick on Berkshire Hathaway

Whitney Tilson on Sears Holdings

WealthTrack: John Montgomery and Whitney Tilson

Two up-and-coming investment stars talk about their unusual routes to money management. Bridgeway Funds founder John Montgomery explains his quant approach and unusual corporate culture and value investor Whitney Tilson of the Tilson Funds discusses following Warren Buffett's style.

WealthTrack Video

Consuelo Mack WealthTrack: September 7, 2007; Whitney Tilson, Jason Zweig, Hersh Cohen

JASON ZWEIG: I don't know that I'm fearful about the outlook for the markets, so much that I'm worried that investors don't really understand their own fears. I think that's the biggest issue here. The way the human brain works, it takes only 1200ths of a second, that's basically a third the length of the time it takes you to blink your eye, for people to register fear, consciously or unconsciously. The sight, the sound, the smell, red colors, arrows pointing downward, stock tickers, and charts going like this. People become fearful, and in the grip of fear, they cannot be rational. They cannot make a logical decision. And even unconscious fear can skew you're judgment and lead you to do something rash that you would never do in a calm moment.

WHITNEY TILSON: We haven't sold any Berkshire, and we continue to buy it and recommend it. It’s the only stock that’s been in their portfolio in almost nine years that we’ve been managing money professionally. So we are big fans, but recently, I'll echo exactly what Hersh said; generally speaking, stick with blue chip companies, strong balance sheets that can crank out growth even in a declining economy, that have a tail wind. Berkshire Hathaway qualifies, McDonald's, one of our top holdings, qualifies. And our largest position is now Target (TGT). It falls into the general category of very high quality, blue chip stocks, and every value guy owns some of them today, be it, Buffett has been buying Burlington Northern, and Johnson & Johnson, and Microsoft. So we think there are a lot of high quality 80-cent dollars out there. But we only own ones where we think there is a catalyst. As I mentioned before, I don't want to own 80-cent dollars --

CONSUELO MACK: And quickly the catalyst for Target is?

WHITNEY TILSON: Like Kraft, a very high quality activist involved, Pershing Square owns nearly 10% of the company. We're close to the situation, and we think there are some ways that Target can unlock some value, and Pershing Square has a great track record also.

Full Article

Whitney Tilson on BRK, TGT & MCD

Whitney Tilson Interview by Maria Bartiromo on CNBC.

Full Video

Whitney Tilson: Be ready to act when market opens a door to opportunity

After a long period of almost unprecedented calm, volatility has returned to the stock market in grand fashion. The reaction on the part of most investors is, at best, unease, and, at worst, downright panic. It’s human nature: for most investors, the pain of stocks going down is more tangible than the joy of when they go up. The common impulse is to do something – anything – to minimise the pain.


While I take no pleasure in others’ misfortunes, we’ve historically made most of our profits from other investors behaving in a panicked and irrational fashion and selling us certain stocks at prices far below their intrinsic value. More volatility equals cheaper stocks, which equals higher returns.

Full Article

Whitney Tilson: Human qualities in managerment matter for long-term success

Assessing management quality is clearly one of the most important aspects of an investment decision. To a large extent, equity investors put their hard-earned capital into the hands of management and count on it being employed skilfully and honestly. When that doesn’t happen, losses typically follow.

“We tend to be more about the jockey than the horse. It’s important to understand how people are going to behave under stress. You don’t have to predict the future if you know the company has the assets and management to do well in difficult times. That’s when the seeds for exceptional performance are planted.” Bruce Berkowitz, Fairholme Capital

“I’m at a stage in my career where I’d say human behaviour is the most important determinant of a business’s long-term success. I don’t care how smart an analyst you are; you can’t really know what’s going on inside a business. We want to invest not only in highly capable managers but also in those with clear records of integrity and acting in shareholders’ best interests. I’ve found that when a manager puts his hands in shareholders’ pockets once, he’s much more likely to do so again.” Charles Akre, Akre Capital

Full Article

Whitney Tilson: Buyout Binge Is Sign of Good Health

The private equity business is simple: using large amounts of debt, buy a company at a low multiple of cash flow, increase the cash flow and then exit at a substantially higher multiple. The combination of cash flow and multiple expansion, juiced by leverage, has produced spectacular returns, leading investors to pour more and more money into the sector, fuelling the record- breaking level of activity. As Warren Buffett pointed out at the recent Berkshire Hathaway annual meeting: “If you have a $20bn fund and get a 2 per cent fee, you’re getting $400m a year. But you can’t raise another fund with a straight face until you’ve invested it, so there’s a great compulsion to invest it quickly so you can raise another fund and get more fees.”

Full Article

Whitney Tilson: 21 Stocks to Make you Rich

Full Article

My photos: Berkshire Hathaway AGM 2007

This was my first Berkshire Hathaway AGM and I have the privilege of meeting so many like-minded investors.

Thank you so much to Whitney Tilson so his generous sharings and teachings.

Also, I couldn't thank Fu Lu enough for his generous sharings and most importantly, without him, I couldn't have seen Warren Buffett's house. Unfortunately, it was so dark that I could hardly see his house in the photo. I must go back next year to get more pictures of his house!

http://picasaweb.google.com/dahhuilaudavid

Best,
David

Whitney Tilson: 2007 Berkshire Hathaway Annual Meeting Notes

Thank you Whitney Tilson for generous sharing

Full Article

Tyco Triple Play

Tyco has a $65 billion market capitalization and long-term debt of $10.5 billion for a debt-to-equity ratio of 0.28. In the 12 months ended March 30, 2007, the company earned $3.7 billion on revenue of $42.4 billion, and generated operating cash flow of $6.3 billion. At about $33, shares of Tyco are up 21% in the past year, and trade for 16.8 times the consensus forecast for 2007 earnings per share of $1.96.

Before the end of June, Tyco will spin off the electronics and health care divisions, which will become independent, publicly traded companies. The spin-off is structured as a tax-free distribution and existing Tyco shareholders will hold 100% of the equity in the three companies.

Full Article

Source: Whitney Tilson

Whitney Tilson: Breaking down Wal-Mart's wall

"What Wal-Mart needs to do is follow the game plan that McDonald's has pursued that's taken McDonald's stock from $30 to $50," Tilson said.

Tilson's playbook for Wal-Mart includes using capital more effectively, improving customers' shopping experience, burnishing its corporate image, unloading its Sam's Club unit and regrouping international operations.

"McDonald's was astonishing in terms of how a company of that size turned out," said Tilson, who also staked a sizeable fund position to the global restaurant chain.

"We know the program to fix Wal-Mart," Tilson added. "We've seen it work and we've made a fortune off it with McDonald's."

Full Article

Applying Behavioral Finance to Value Investing

Excellent article by Whitney Tilson. MUST READ for all investors!

Full Article

Whitney Tilson: Not-to-be-missed tips for value hunters

My recent column detailing the 10 investment traps I’ve identified prompted several readers to ask if I have a comparable list of the opposite – types of opportunities that are likely to lead to good investment outcomes.

I do, and happily it’s a bit longer than the list of traps. Given that the first step to successful investing is knowing which ponds to fish in, here are the 15 most common types of value opportunities I have been able to capitalise on in my investing career

Full Article

Video: Whitney Tilson on Wal Mart

Whitney Tilson's view on why Wal Mart is undervalued.

Video

Whitney Tilson: Opportunity to sample the treats

From: FT.com.

-----------------------

When it comes to owning stocks of the best-known businesses in the world, value investors usually feel like children looking through the window of the candy store, unable to afford the treats inside because they refuse to pay the prices such high-quality franchises typically bear. But a rare opportunity appeared over the past year for value investors to go inside the store and sample the treats.

First, buying low price-to-book stocks has produced superior returns over extended periods of time but there have also been periods of significant underperformance. Second, the average time in which growth stocks dominated was 37 months, whereas when value stocks returned to favour, they remained in favour for an average of 76 months. Interestingly, 76 months from the beginning of the latest value cycle in March 2000 took us to the middle of this year, which is when large-cap growth stocks started to outperform and traditional low price-to-book stocks started to underperform.

-----------------------

Whitney Tilson: Berkshire Hathaway Still Selling At a Discount!

Whitney Tilson, who has one of the best funds in USA this year, has written a great article about undervaluation of Berkshire!

Thank you Whitney for this great analysis.

To read the complete article.

Best,

Dah Hui Lau (David)

dahhuilaudavid@gmail.com