From Whitney Tilson’s latest email to investors

Whitney Tilson

1) I’m off to Omaha tomorrow morning to attend my 19th consecutive Berkshire meeting. If you’re going, I’d like to invite you to two events on Friday evening and Saturday afternoon, both at the Omaha Hilton (I’m not sure which rooms; there will be signs):

 

  1. a) My friend Chuck Gillman and I are hosting our annual cocktail party from 8pm-midnight on Friday, May 5th. No agenda, no speeches, no dress code – just come, enjoy the drinks and snacks, and meet other value investors.

 

  1. b) Chuck and I are also sponsoring a casual get-together immediately following the annual meeting (~3:30) on Saturday, May 6th – just walk across the street or take the skybridge to the Hilton. It will end around 6pm.

 

2) I just updated my Berkshire slide presentation for the first time in a year – it’s attached and also posted at  BRK.pdf. I peg intrinsic value at $296,000 per A share, 19% above today’s level.

 

3) A funny article about the rush for good seats at the BRK meeting:

On Saturday, he’s up by 3 a.m. and arrives at the convention center by 4 a.m. to secure a good spot in line. He uses an entrance for upstairs seating that, he says, saves him about 20 seconds. He positions himself near a middle door because, he says, the outer ones sometimes don’t open right away.

When the arena opens at 7 a.m., he dashes down a flight of stairs, across the arena, up another set of stairs and past the front two rows to his favorite seats—all while songs such as Pink Floyd’s “Money” blare through the sound system.

“If anybody does it better than us, I’d like to see it,” said Mr. O’Kane, who has attended the meeting seven times and has spent years refining his tactics with Victor Velkov, a friend from Brisbane, Australia.

4) A lot of mega-cap growth names are up 20-30% YTD – and that is not from a blow-off low; rather, it’s off strong returns last year. The VIX hit a 10-year low on Monday (see: www.cnbc.com/2017/05/01/wall-streets-fear-gauge-plunges-to-10-year-low.html). And don’t even get me started on the proliferation of young “bull market geniuses” who have never seen a bear market. There is just so much complacency…

 

This is feeling a little like early 1999 to me – valuations were high, but not insane (which is where they went over the next 12 months before internet/tech/Nifty 50 stocks imploded).

 

I wonder if we’ll look back on Tesla being down 5% today as some sort of indicator???

 

I welcome thoughts/comments.

 

5) Speaking of signs of a bubble (and maybe one in the process of bursting), this is just the kind of story that always accompanies such things:

For a solid decade, Nick Adams averaged 28% annual returns on the money he managed for a secretive trillion-dollar investment firm.

Then he fell in love with Silicon Valley venture deals. That’s when things took a very different turn.

Today, the Wellington Management Co. star has been reduced to steps unthinkable for most hedge-fund managers. He is admitting mistakes and apologizing. He has even agreed to refund fees, according to investors.

The travails of Mr. Adams, a 56-year-old descendant of the second U.S. president, has riveted Wall Street and startup circles. Wellington, with $1 trillion under management, is one of many old-guard investors, including giants such as Fidelity Investments and Tiger Global Management, that piled into startup technology companies in recent years trying to strike gold with the next Facebook Inc. The new money helped push investments in venture-backed companies to $77 billion in 2015.

The frenzy has since faded, turning Mr. Adams’s misadventures into a cautionary tale about chasing Silicon Valley riches. Venture-capital investment plummeted 42% last year, putting pressure on existing investments by making it harder to attract new money at higher valuations. Fewer companies are filing for initial public offerings, a step that would allow them to repay their early backers. Fidelity has slashed its estimates of the value of some of its startup stakes, and Tiger Global reported double-digit investment losses last year.

6) It’s wonderful to see this utter madness being reined in (and, no, I’m not talking about our empty-headed-malignant-narcissist-in-chief!):

Entrepreneur Jeffrey Aronin said a few years ago he hoped to eventually sell Marathon Pharmaceuticals LLC, which he controls and runs, for billions of dollars, according to a person who heard the comment. Some employees have said they now expect him to shut down the company.

His deflated ambition is a sign of the increasingly hostile reaction to drug companies that specialize in sharply raising the prices of old medications. Mr. Aronin did that over and over again for 15 years, most recently after Marathon won approval in February to sell a drug for muscular dystrophy in the U.S.

Marathon set the price at $89,000 a year. Some families were paying about $1,200 a year to buy the drug, a steroid called deflazacort, from an online pharmacy in the U.K. and have it shipped to the U.S.

Instead of conducting large clinical trials to test its safety and effectiveness, which might have cost tens of millions of dollars, Marathon spent about $370,000 to license data produced in earlier clinical trials.

It took only a month for sticker shock to cascade into criticism from families of patients with Duchenne muscular dystrophy, a rare and fatal condition that primarily strikes young boys, a shame campaign from congressional lawmakers in both parties and then a surprise deal by Marathon to sell the treatment to another company.

Marathon has no other revenue-generating products and is looking to sell its other drug assets, two people familiar with the matter said.

7) Ah, karma is such a b/5tch – LOL!

A tug-of-war is raging in shares of a company that auctions off foreclosed homes online.

Altisource Portfolio Solutions SA’s stock price doubled over the past two months, as one large shareholder appeared to succeed in draining the pool of shares short sellers need to wager on declines.

But then Thursday, fresh questions about the company’s future profits sent shares careening lower.

The sudden rise and fall in Altisource’s stock is an unusual case study on the mechanics of securities lending, which facilitate bearish bets, and appears to be a rare example of an orchestrated “short squeeze” or forced buying.

…Mr. Devaney’s strategy to put the squeeze on short-sellers appeared to be working. Not only had Altisource’s stock price soared, but short interest in the stock fell by more than 900,000 shares from the end of March through Wednesday, to 5.05 million, according to S3 Partners, a financial analytics firm.

But things took an unexpected turn on Thursday. That’s when regulators, including the Consumer Financial Protection Bureau, sued Ocwen, alleging, among other things, that the company illegally foreclosed on at least 1,000 borrowers and failed to properly implement a wide range of basic functions to service home loans. Ocwen’s fresh regulatory issues casts another shadow on Altisource’s biggest customer.

Ocwen disputes the allegations, saying it will continue

1, 2  - View Full Page