The following is a letter from Whitney Tilson to hedge fund investors, which ValueWalk received via email.

Whitney Tilson K12 Questcor Pharmaceuticals QCOR
Courtesy of Kase Capital

Dear Partner,

I hope you’ve had a wonderful holiday season and wish you a happy new year.

I will send you my annual letter later this month, but wanted to give you a quick update immediately, as I do at the beginning of every month.

Our fund rose an estimated 3.9% in December vs. 2.5% for the S&P 500 and 1.3% for the HFRX Equity Hedge Index. For the year, our fund finished up 16.8% vs. 32.4% for the S&P 500 and 11.2% for the HFRX Equity Hedge Index.

Winners on the long side in December were Grupo Prisa (B shares) (+23.5%), Hertz Global Holdings, Inc. (NYSE:HTZ) and Avis Budget Group Inc. (NYSE:CAR) (18.0% and 9.7%, respectively) and Spark Networks (9.2%). Thank goodness I exited dELiA*s in November, as it tumbled 26.7% in December.

For all of 2013, our three largest positions all year, Howard Hughes Corp (NYSE:HHC), American International Group Inc (NYSE:AIG) and Berkshire, all performed well, rising 64.5%, 44.6% and 32.7%, respectively. Other winners included Netflix, Inc. (NASDAQ:NFLX) (297.6%), Grupo Prisa (B shares) (172.6%), Deckers (109.7%), the Japan side fund (90.5% through November), Canadian Pacific (48.9%), Goldman Sachs (39.0%), and Citigroup (31.7%). The only decliners of note during the year were Spark Networks (-20.9%) and Iridium (-7.0%).

It was a different story on the short side, however. As I’ve discussed in previous letters, 2013 was horrific for pretty much all short sellers and we were no exception. I will discuss the year’s lowlights and lessons learned in my annual letter.

Our short book was flat in December, despite the market’s strong upward move, thanks primarily to InterOil (-41.8%), Krispy Kreme Doughnuts (NYSE:KKD) (-24.0%) and Opko Health Inc. (NYSE:OPK) (-19.9%).

In the rest of my letter (attached), I discuss InterOil Corporation (NYSE:IOC) and Lumber Liquidators Holdings Inc (NYSE:LL).

Entering 2014, I believe our fund is well positioned to outperform, as I will discuss further in my annual letter.

Kase Fund ltr to investors-12-13 PDF for download

Tilson letter also embedded in scribd

Kase Fund Ltr to Investors-12-13 by ValueWalk.com