Business

Tilson: You know Market Has peaked & Ramp Up Shorts When I Buy GOOG & FB

From Whitney Tilson’s latest email to investors – he pitches long GOOG and FB with in-depth slides. See that and more below.

You know that the market has peaked and it’s time to go to cash and ramp up your short book when I’m buying GOOG and FB…but nevertheless, I bought both a couple of months ago (GOOG is currently a 6.2% position across my funds, FB 3.5%), for reasons I outline in the attached presentation, which I just gave at the 14th Annual Value Investing Seminar in Italy. I’d welcome your feedback.

Interestingly, one of the catalysts for my buying them was hearing Buffett and Munger, at the Berkshire meeting in early May, admitting that in not buying GOOG that they “failed” shareholders and “blew it” (see pp 33-35).

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2) Some fascinating research, with important implication for those who become highly successful in any field. Power Causes Brain Damage, www.theatlantic.com/magazine/archive/2017/07/power-causes-brain-damage/528711. Excerpt:

The historian Henry Adams was being metaphorical, not medical, when he described power as “a sort of tumor that ends by killing the victim’s sympathies.” But that’s not far from where Dacher Keltner, a psychology professor at UC Berkeley, ended up after years of lab and field experiments. Subjects under the influence of power, he found in studies spanning two decades, acted as if they had suffered a traumatic brain injury—becoming more impulsive, less risk-aware, and, crucially, less adept at seeing things from other people’s point of view.

3) Roddy Boyd with some excellent reporting on BOFI (I have no position), which traces some of its miracle growth to lending to “the worst of the worst online lending predators (business cash advance, etc.) and some questionable accounting.” BOFI Federal Savings: Annals of the Bank of Misery, Part I, http://sirf-online.org/2017/06/28/78175. Excerpt:

Intrigued by BOFI’s drama, the Southern Investigative Reporting Foundation spent more than a year investigating the bank and our conclusion is that Garrabrants’ obsession with short sellers is entirely justified: Their skeptical articles on BOFI have put the crux of his modern banking miracle at grave risk. From where he sits, anything he and his lawyers can do to distract investors from what’s in the company’s filings is money well spent.

 

But as a lot of the CEOs from that erstwhile gathering above would attest to, the first wounds from this type of lending show up on the income statement; the fatal ones are on the balance sheet.

 

4) This is disgusting. It’ll be interesting to see if the SEC takes action here – a good test of whether it will have any teeth under Trump. A Shipping Company’s Bizarre Stock Maneuvers Create High Seas Intrigue, www.wsj.com/articles/a-shipping-companys-bizarre-stock-maneuvers-create-high-seas-intrigue-1499960367. Excerpt:

GOOG and FB brief excerpt

FB

Stock price (7/13/17 close): $159.26
• Market cap: $462 billion
• Cash & STI: $32 billion ($11/share)
• Debt: $0
• Enterprise value: $430 billion
• TTM EPS* and P/E: $3.93, 40.4x
• 2017 est. EPS and P/E: $4.87, 32.6x
• 2018 est. EPS and P/E: $6.02, 26.4x
• TTM EBITDA and EV/EBITDA: $16.3 billion, 26.4x
• 2017 est. EBITDA and EV/EBITDA: $23.9 billion, 18.0x
• 2018 est. EBITDA and EV/EBITDA: $30.3 billion, 14.2x

GOOG and FB slides from Tilson embedded below

Betting on the Best-Alphabet-Whitney Tilson-Kase Capital-Italy-7-14-17(1)

GOOG and FB

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