From Whitney Tilson’s email to investors
Robin Hood Conference Live: Ainslie Tepper, Druckenmiller, Einhorn, Griffin
The Talas Turkey Value Fund returned 9.5% net for the first quarter on a concentrated portfolio in which 93% of its capital is invested in 14 holdings. The MSCI Turkey Index returned 13.1% for the first quarter, while the MSCI All-Country ex-USA was down 5.4%. Background of the Talas Turkey Value Fund Since its inception Read More
I gave a presentation at the Robin Hood Investors Conference yesterday entitled Why I’m Cautious, A Stroll Down Memory Lane, and My Favorite Long and Short Ideas,
In it, I:
- Discuss why I’ve positioned my fund so cautiously;
- Reviewed the 12 ideas I pitched at prior Robin Hood conferences, including three still in my portfolio: Spirit Airlines and SodaStream (longs) and Exact Sciences, my largest short today; and
- Shared three current favorite ideas: Berkshire Hathaway (long), the Direxion Daily 20+ Year Treasury Bull 3x ETF (short; a bet on rising interest rates), and a new short idea, Wingstop.
Shortly after my presentation, I did a 19-minute interview with Bloomberg TV about these topics (and why I’m torn on whether to short Tesla), which you can watch here: www.bloomberg.com/news/videos/2016-11-29/whitney-tilson-on-trump-s-market-impact-buffett-tesla
2) Despite being less than 40% long and 20% short, my fund had a +7.5% month, quite a bit due to Fannie Mae, which, after today’s 46% pop, is up 172% since election day. I’m pretty sure that surpasses Netflix for the biggest, fastest move of any stock in my fund’s nearly 18-year history…
The GSEs’ move is based on the (correct, I think) belief that the new Trump administration will strike a deal to liberate the GSEs from government control. Here’s an excerpt from an interview this morning that Steve Mnuchin, Trump’s appointee to be our next Treasury Secretary, did with Maria Bartiromo:
Maria: “Would you move to have these privatized?”
Mnuchin: “Absolutely. We gotta get Fannie and Freddie out of government ownership. It makes no sense that these are owned by the government and have been controlled by the government for as long as they have. In many cases this displaces private lending in the mortgage markets and we need these entities that will be safe; so let me just be clear we’ll make sure that when they’re restructured they’re absolutely safe and they don’t get taken over again but we gotta get them out of government control.”
Maria: “This is a big deal. These are huge institutions. You think that…if we saw that as not complicated, wouldn’t that have happened already…that it would get out of government?”
Mnuchin: “Well, I think with this administration [Obama] it hasn’t been a priority. If it had been a priority it would have. And in our administration it’s right up there in the list of the top 10 things that we’re going to get done and we’ll get it done reasonably fast.”
(No snarky comments please about the how thankful I should be to the guy who I tried so hard to prevent from becoming President — LOL! I have no regrets, as I am quite certain that my warnings will prove prescient (though I mostly hope I’m wrong)…)
3) Mark Spiegel of Stanphyl Capital gave an excellent presentation at the Robin Hood conference yesterday on why he’s short Telsa, which he’s given me permission to share so I’ve posted it at: tsla-spiegel-rh16. He also gave me permission to share his November letter (attached), in which has also discusses Tesla.
4) 17 years ago, near the peak of the Internet bubble in Nov. 1999, Buffett predicted stock market returns of 6%. The actual number? 5.9%! See: Surprise! Warren Buffett turns out to be more prescient about stocks than politics, by Carol Loomis (http://fortune.com/2016/11/22/surprise-warren-buffett-turns-out-to-be-more-prescient-about-stocks-than-politics). Here are his predictions for the next 17 years:
Having proved his ability to handle crystal ball work, Buffett, 86, was asked by this writer—an 87-year-old friend of his—whether he might care to make a prediction about total returns over the 17 years starting now and ending late in 2033. He declined to name a rate of return, explaining “I have to be careful what I say because I have no doubt that you will be around then to write another follow-up report.”
Buffett did, nonetheless, proffer three thoughts about those coming 17 years.
First, he believes that an investor in a low-cost S&P index fund who reinvests all dividends will do better—very likely substantially better—than an investor who buys a 17-year government bond and reinvests all of his coupons in the same instrument.
Second, he suspects that amateur, “do-nothing” investors following the same index fund strategy will in aggregate end up with results superior to those realized by investors who choose to employ professionals charging high fees.
Third, he predicts that many professionals who fail their investors by underperforming the index funds will get very rich in the process of doing so.
5) It will indeed be interesting to see if the media can succeed in bringing down HLF (and its scummy peers) where regulators failed…
Clearly, John Oliver’s show affected Herbalife’s stock price more negatively than the FTC’s injunction. It might not make any sense, considering that the FTC’s ruling cost Herbalife loads of cash, and hobbled its business model, while Last Week Tonight merely turned Herbalife and other MLMs into a laughing stock for 30 minutes.
But that is the power of the media. Throughout history, the media has breathed life into entire industries such as the diamond industry in the 1930’s after The Great Depression (most engagements to this day are still consummated with a diamond ring) and has even influenced change in individual companies such as McDonald’s (remember Super Size Me? McDonald’s eventually scrapped the super-sized option from its menu.)
The market’s stark contrast in reaction to the FTC injunction versus Last Week Tonight‘s MLM episode is evidence of a primal force at work–people can shrug off losing money, but they can’t stand to be socially humiliated or isolated.
…This sustained and increasingly brazen “media-battering” puts Herbalife at risk of “permanent brand impairment”–the risk that someday, it might become common household perception that MLMs are something to be viewed as repulsive, rather than something neutral or even positive.
6) I sure hope Trump, Mnuchin, et al have the good sense to realize how urgently necessary the CFPB is, especially to protect the very people who delivered the election to Trump. This article, Will Guys With Guns Replace the Agency Elizabeth Warren Created? (http://www.nytimes.com/2016/11/26/opinion/sunday/will-guys-with-guns-replace-the-agency-elizabeth-warren-created.html), highlights one of the many awful things likely to happen if the CFPB is eliminated or neutered: