From Whitney Tilson, of T2 Partners:
Our fund fell 13.6% in May vs. -6.0% for the S&P 500, -5.9% for the Dow and -7.1% for the Nasdaq. Year to date, our fund is up 8.5% vs. 5.2% for the S&P 500, 2.6% for the Dow and 8.9% for the Nasdaq.
On the long side, other than our two largest positions, Berkshire Hathaway (-1.6%) and Iridium warrants (-2.8%), everything else got clobbered: Pep Boys (-37.8%), J.C. Penney (-27.3%), Dell (-24.7%), Sears Canada (-23.2%), JPMorgan Chase & Co.(NYSE:JPM) (-22.9%), Netflix (-20.8%), Barnes & Noble (-20.8%), Citigroup (-19.8%), Grupo Prisa (B shares) (-19.3%),Goldman Sachs Group, Inc. (NYSE:GS) (-16.9%), American International Group, Inc.(NYSE:AIG) (-14.3%), Resource America (-12.9%), SanDisk (-11.6%), and Howard Hughes (-10.8%)
Our short book declined substantially more than the market (though not nearly enough to offset the losses on the long side), led by Green Mountain Coffee Roasters, which announced dreadful earnings and fell 51.6%. Other winners included First Solar (-31.7%), Nokia (-26.8%), Salesforce.com (-11.0%), Tesla (-11.0%), and St. Joe (-10.4%), partially offset by Interoil (+9.9%).
It was an ugly month – our second-worst ever – but for perspective, our fund gave back slightly more than the 12.3% gain of the previous two months. We’re still having a decent year, with a healthy, market-beating gain. In fact, this is the fourth-best start to a year in our fund’s 14-year history.
Most importantly, our portfolio, we believe, is back to being super cheap again. We own stocks of good companies that are, in general, performing well, so in our view the only thing that’s changed in the past month is that the margin of safety (and therefore the potential upside) has increased markedly.
In the rest of our letter (below), we discuss our macro views, share our thoughts on volatility, and give updates on SanDisk Corporation(NASDAQ:SNDK), Dell Inc. (NASDAQ:DELL) J.C. Penney Company, Inc.(NYSE:JCP), AIG, the U.S. financials, and The Pep Boys – Manny, Moe & Jack (NYSE:PBY).