Well that was quick!!  See here April 19th 2017 piece Whitney Tilson Goes Long Staples

Excerpted from Whitney Tilson’s latest email

1) There are many downsides so openly revealing and discussing many of the stocks I own or am short (as I did last fall with my new short in Wingstop and again last week with my new long in Staples), the biggest two being commitment bias (defined here) and embarrassment when I’m wrong. I nevertheless do it for one HUGE (bigly!) reason: it can often lead to valuable additional information, insights and perspectives. Some investors eschew this – they think it can lead to mental mistakes like herd behavior and anchoring on recent, vivid data – but I embrace it because I think the benefits outweigh the downsides. Here are two recent examples:


  1. a) After sending around my updated slides recently on why I’m short Wingstop (see here), a Wall St. analyst who has WING as one of his top picks, emailed me last week and we had a nice conversation yesterday. Neither of us changed the other’s mind, but I found it illuminating to hear the bull case on a stock that strikes me as a no-brainer short.


  1. b) After my email last week in which I disclosed I’d established a new long position in Staples, my friend Kian Ghazi, who runs an outstanding research service called the Hawkshaw Specials Situations Report, sent me a copy of his report on SPLS, which he published last October. (If you want to learn more about his service, you can email him at [email protected].)


In it, he argues, based on extensive interviews (the “scuttlebutt research” that he’s known for), that Staples’ commercial business, a much better business than its retail stores and the main reason to own the stock, is going to come under immense competitive pressure due primarily to Amazon investing heavily in and ramping up Amazon Business and, secondarily, to a stabilization of Office Depot’s commercial unit. As a result, he sees “20-40% downside to 2018 EPS and 25-45% downside in the shares.” Here’s the first page of Kian’s report (shared with permission):


Kian’s report led me to do additional research, which largely confirmed his findings, so I sold the position. Such a quick turnaround is almost unprecedented for me, but it was actually an easy decision: if I couldn’t definitively prove that Kian’s thesis was incorrect, then I certainly didn’t want to own the stock.


It’s embarrassing to admit that my initial research was inadequate, but mistakes happen – or new information becomes available – all the time. The key, to be a successful investor, is to correctly incorporate the new information and make the right decision, even if it means reversing a decision you made only a short time before.


2) Speaking of decision making, I just finished the new book by my friend Cheryl Einhorn, Problem Solved: A Powerful System for Making Complex Decisions with Confidence & Conviction, and really enjoyed it. Here’s an excerpt from the review below:


The book presents a smart system — the AREA Method — for making decisions when the stakes are high.

Einhorn is an award-winning investigative journalist. She first developed the AREA Method during her work as a reporter, and now teaches it to her students at Columbia University as well as her consulting clients. AREA stands for Absolute, Relative, Exploration/Exploitation, and Analysis. Each takes its own approach to mine the insights and incentives of others, and prevent any mental shortcuts.

One step builds to another, breaking the research process into a series of easy-to-follow activities that are recorded in a journal. Your research stays focused, and you never lose sight of the driving purpose behind your decision.


3) Roger Lowenstein with a good article on CEO pay:

CEOs don’t need this much for motivation. Iger is a competent, responsible executive. He would get out of bed, put on his tie, and go to work for less. Directors ratify such arrangements because everybody else does it. At least in theory, boards monitor each individual category of pay, but they never challenge the structure of the pay machine itself. Directors follow self-interest (with director fees running well into six figures, who wants to rock the boat?). They are reinforced by consultants who know that complex packages justify their existence.

The outcome is that directors subscribe to a collective delusion that such arrangements are necessary. Compensation is determined in an echo chamber in which gargantuan pay is considered normal.

It wasn’t always this way. In 1978, CEOs earned 30 times the take of the average employee; now, according to the Economic Policy Institute, they get 276 times as much. These numbers betray an attitudinal upheaval. Time past, a CEO’s pay was set on a scale with others in the same organization. This was dubbed “internal equity.” But in the 1980s, a consultant named Milton Rock sold the idea of “external equity.” Now, as if CEOs belong to a tribe of super­humans, they are paid on a scale with only their “peer CEOs.”

4) A very interesting article on online pricing:

As Christmas approached in 2015, the price of pumpkin-pie spice went wild. It didn’t soar, as an economics textbook might suggest. Nor did it crash. It just started vibrating between two quantum states. Amazon’s price for a one-ounce jar was either $4.49 or $8.99, depending on when you looked. Nearly a year later, as Thanksgiving 2016 approached, the price again began whipsawing between two different points, this time $3.36 and $4.69.

We live in the age of the variable airfare, the surge-priced ride, the pay-what-you-want Radiohead album, and other novel price developments. But what was this? Some weird computer glitch? More like a deliberate glitch, it seems. “It’s most likely a strategy to get more data and test the right price,” Guru Hariharan explained, after I had sketched the pattern on a whiteboard.

The right price—the one that will extract the most profit from consumers’ wallets—has become the fixation of a large and growing number of quantitative types, many of them economists who have left academia for Silicon Valley. It’s also the preoccupation of Boomerang Commerce, a five-year-old start-up founded by Hariharan, an Amazon alum. He says these sorts of price experiments have become a routine part of finding that right price—and refinding it, because the right price can change by the day or even by the hour. (Amazon says its price changes are not attempts to gather data on customers’ spending habits, but rather to give shoppers the lowest price out there.)

It may come as a surprise that, in buying a seasonal pie ingredient, you might be participating in a carefully designed social-science experiment. But this is what online comparison shopping hath wrought. Simply put: Our ability to know the price of anything, anytime, anywhere, has given us, the consumers, so much power that retailers—in a desperate effort to regain the upper hand, or at least avoid extinction—are now staring back through the screen. They are comparison shopping us.

They have ample means to do so: the immense data trail you leave behind whenever you place something

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