The latest from Whitney Tilson’s email to investors
Hedge Funds: Small Firms Profit As Big Names Close In 2020
At the beginning of July, Lansdowne Partners, one of Europe's oldest and best-known hedge fund managers, announced that it was closing its flagship hedge fund after a run of poor performance. The closure is the latest in a string of high-profile hedge funds that have decided to shut up shop in recent years. Billionaire investor Read More
I was delighted to receive 44 applications for the 12 slots in my first year-long investment seminar, which begins next month. So many impressive people applied that I’ve split them into four groups and scheduled different seminars for each over the next year.
I’m doing this because I think the single greatest value participants will derive is the deep relationships that I aim to foster among the participants in each seminar. I’ve seen how powerful – even life changing – this can be through my experience over the past decade with my forum in Young Presidents Organization. For these bonds to form, it helps to have people similarly situated in life: roughly the same age, point in their careers, etc. Thus, the four seminars will be for people who fit the following profiles:
- The dozen folks I’ve selected for the first seminar are all 5-10 years out of college, typically with early experiences in the corporate/banking worlds, before moving to the buy side. Most have either launched their own funds or have aspirations to do so in the near future, so a meaningful part of the seminar will focus on how to launch and build a hedge fund.
- The second seminar, which I’m planning to launch in late February, will be for a younger group: those 1-5 years out of college, most of whom are still in the corporate/banking worlds and looking to make the jump to the buy side.
- The third seminar will be for a range of people from all over the world (Australia, Switzerland, UK, Italy, Mexico, etc.), many of whom are planning to attend the Berkshire meeting in Omaha on Saturday, May 5th, so I’ve scheduled it in NYC the week before and then we’ll all fly to Omaha that Friday.
- The last seminar will be for mid-career folks who are passionate about investing and mostly managing just their own or friends and family money.
The December seminar is now full but the others are not, so I will be accepting applications for them on a rolling basis. To apply, one simply has to email me ([email protected]) the following:
- A brief letter of interest, telling me about yourself, what you would bring to the seminar, and what you hope to get out of it;
- Your resume/bio; and
- A brief write-up of one of your current favorite stock ideas, long or short.
2) I found a great conference room for my seminar next month through Breather.com, which I had never heard of until a friend recommended it, but I am now a big fan. The company helps people find space – typically a conference room for a meeting – whether for an hour, an entire week (my case), or longer. It launched in Montreal in 2013 and now operates in 10 cities: NYC, SF, LA, Chicago, DC, Boston, London, Toronto and Ottawa. It has a web site (www.breather.com) that sort of looks like AirBNB, which lists dozens of available options based on a wide range of criteria you set. Best of all, you can book a room and if your plans change, you can cancel at the last minute with no penalty.
If you try it out, be sure to use my referral code (WTilson) and you’ll get a $45 discount. If you have a complex or expensive booking, contact my sales rep Jonathan Ifrah ([email protected] or (877) 711-5990 x7069) and he’ll take care of you.
3) My friends Paul Johnson and Paul Sonkin will be guest speakers at my seminar, talking about their outstanding new book, Pitch the Perfect Investment, which I really enjoyed and learned from. They’re teaching a half-day seminar next week that I’ll be attending – here’s further info about it:
We still have a few seats left for our pitching workshop in New York City on Friday, November 17, 2017, from 1pm-5pm. The class will cost $595 and be limited to no more than 15 people.
The goal of every pitch is to motivate your audience to "clear their desk" to immediately begin working on your idea for fear of missing the opportunity. Some of the topics we will cover include:
- Security Selection: How to evaluate your audience's criteria to ensure they will listen to your idea.
- Developing Variant Perception: How to determine your idea is different from the consensus and right.
- Identifying Mispricing: How to diagnose a situation to ensure you have correctly identified a genuine mispricing.
- Structuring Content: How to organize and present the content of your message to achieve maximum impact.
If you are interested in attending or have any additional questions, please contact us at [email protected]
4) A friend, who’s not in the investment business, recently sent me the following email:
As for now, it looks like bitcoin is the best investment opportunity in the history of this world. It started with the price of $.003 in 2011, in March of this year it was $1,000 and now it’s about $6,000. It has limited and definite amount of supply compared to physical money that is printed every day around the world and even precious metals that are found in new locations too... plus it solves many problems for its users... I know users include terrorists and money laundering criminals. But now you can buy legal products and services online through bitcoin, including cars and even private schools education in the US! None of my contacts in the finance and investing industries understands this instrument and every single of them sees only danger and not an opportunity...
My other question is about IPOs: what are your thoughts on investing in IPOs during their lockup periods (before insiders can sell it)? I know IPOs are risky too... but is there any research about investing in IPOs only in the first month or even few days and then selling it? I’ve noticed many IPOs have great returns in the very first day ... Have you seen ROKU recently (up almost 70% in few hours)?
What a sign of the times… I haven’t heard this kind of talk since 1999… Here was the reply I sent him:
I can tell you with certainty that the surest way to get poor quickly is to try to get rich quickly.
My advice is to focus on your business and opportunities in your sweet spot, and invest your savings in an S&P 500 index fund.
5) Speaking of bitcoin, it’s good to see the SEC (FINALLY!) cracking down on these total scam ICOs. S.E.C. Warns Celebrities Endorsing Virtual Money, www.nytimes.com/2017/11/01/business/sec-warns-celebrities-endorsing-virtual-money.html. Excerpt:
The Securities and Exchange Commission took a first step on Wednesday to head off the recent trend of celebrities endorsing new virtual currencies, warning that they could be breaking laws.
Entrepreneurs have been issuing the digital currencies through so-called initial coin offerings, or I.C.O.s, which have become a hot but largely unregulated method of fund-raising for technology projects.
So far this year, some 270 projects have raised over $3 billion by selling new currencies to investors. The vast sums of money have drawn in celebrities, like the socialite Paris Hilton and the rapper the Game, who have promoted particular projects, generally in exchange for a payment of some sort.
6) And speaking of total scams, that is how I view the tax avoidance schemes of Apple and so many other international corporations. What’s going on here is outrageous! Republicans looking for a way to pay for their tax plan should look hard at this… A good piece of reporting by the NYT. After a Tax Crackdown, Apple Found a New Shelter for Its Profits, www.nytimes.com/2017/11/06/world/apple-taxes-jersey.html. Excerpt:
The previously undisclosed story of Apple’s search for a new island tax haven and its use of Jersey is among the revelations emerging from a cache of secret corporate records from Appleby, a Bermuda-based law firm that caters to businesses and the wealthy elite.
The records, shared by the International Consortium of Investigative Journalists with The New York Times and other media partners, were obtained by the German newspaper Süddeutsche Zeitung.
The documents reveal how big law firms help clients weave their way through the gaps between different countries’ tax rules. Appleby clients have transferred trademarks, patent rights and other valuable intangible assets into offshore shell companies, avoiding billions of dollars in taxes. The rights to Nike’s Swoosh trademark, Uber’s taxi-hailing app, Allergan’s Botox patents and Facebook’s social media technology have all resided in shell companies that listed as their headquarters Appleby offices in Bermuda and Grand Cayman, the records show.
“U.S. multinational firms are the global grandmasters of tax avoidance schemes that deplete not just U.S. tax collection but the tax collection of most every large economy in the world,” said Edward Kleinbard, a former corporate tax adviser to such companies, now a law professor at the University of Southern California.
Indeed, tax strategies like the ones used by Apple — as well as Amazon, Google, Starbucks and others — cost governments around the world as much as $240 billion a year in lost revenue…
7) Some interesting comments on Trump at the Robin Hood conference last week, Billionaire Republicans Privately Diss Trump, http://nymag.com/daily/intelligencer/2017/10/billionaire-republicans-privately-diss-trump.html. Excerpt:
At this year’s event, despite a roaring stock market, the mood was glum. Barry Sternlicht, a billionaire real-estate investor, hotel mogul, and self-described Trump friend and golf partner, seemed to have soured on the president. “I expected him to go to the middle, because I thought he wanted to be great,” he said of Trump, according to an audio of his off-the-record talk obtained by New York. “I played [golf] with Donald Trump and his golf game is like his presidency,” he said, eliciting guffaws. “He’s amusing as my friend, but he’s not very amusing as president of the United States. And I’m a Republican.”
Other conference participants sounded the alarm more loudly. Frequent GOP donor Seth Klarman, CEO of $30 billion Baupost Group hedge fund, had already warned his investors about Trump’s protectionist policies and the deficits his tax plan would produce. But at Robin Hood, Klarman — who is widely revered in investing circles — offered a much harsher assessment of Trump to his peers.
“The president is a threat to democracy. He has attacked journalists and he’s threatening to take away NBC’s license,” Klarman said, according to an audio recording of his remarks. “He’s attacking judges. He’s violating all sorts of democratic norms, from the emoluments clause to questioning the election and threatening to lock up his opponent. People don’t focus on this but Nazi Germany had a constitution before Hitler came to power and at the end of the war they had the exact same constitution. It lasted all the way through, but democracy didn’t.”
Klarman continued: “The country is getting divided, whether it’s immigrants, whether it’s transgender people, whether it’s blacks, whether it’s Mexicans. It’s awful.”
Seven months ago, Sternlicht was on CNBC talking about how Trump’s moves were inspiring the business community — but that wasn’t his message last week. Sternlicht wryly noted that he was waiting for Trump’s promises to materialize, noting that “deregulation has not really taken place yet” and “we haven’t seen much in the way of infrastructure spending.” Sternlicht, whose Miami-based Starwood Capital Group is opening a new chain of high-end hotels (including One New York and One Brooklyn) with the message to visitors to “live green,” also said Trump’s “stance on the environment is just inconceivable to me.”
8) Buffett missed PetroChina’s brief run-up to $1 trillion shortly after he sold, but played this awfully well nevertheless. The Biggest Stock Collapse in World History Has No End in Sight, www.bloomberg.com/news/articles/2017-10-29/the-biggest-stock-collapse-in-world-history-has-no-end-in-sight. Excerpt::
In 2002 and 2003, Berkshire bought 1.3% of China’s dominant oil company PetroChina (PTR, +0.03%) for $488 million. Some questioned the investment. PetroChina’s oil fields looked tapped out, and the company, with 400,000 employees, was loaded down with costs. At the time, PetroChina had a market cap of $37 billion. Buffett suspected it was worth $100 billion. Buffett was low. Rising oil prices and new discoveries caused PetroChina’s shares to soar. By the time Berkshire sold in 2007, PetroChina’s market cap had reached $275 billion, and Berkshire reaped a $3.6 billion gain.
9) This guy should have been arrested long ago for his deadly scheme – but better late than never. Kudos to Roddy Boyd for helping expose what Kapoor and Insys were doing more than TWO YEARS AGO! – see:
- The Black World of Insys Therapeutics, http://sirf-online.org/2015/07/14/the-darkening-world-of-insys-therapeutics, 7/14/15
- Murder Incorporated: Insys Therapeutics, Part I, http://sirf-online.org/2015/12/03/murder-incorporated-the-insys-therapeutics-story, 12/3/15
- Murder Incorporated: Insys Therapeutics, Part II, http://sirf-online.org/2015/12/09/insys-therapeutics-murder-incorporated-part-ii, 12/9/15
- The Brotherhood of Thieves: Insys Therapeutics, http://sirf-online.org/2016/01/25/the-brotherhood-of-thieves-insys-therapeutics-2, 1/25/16
Pharmaceutical Founder Arrested In Alleged Nationwide Opioid Scheme, http://www.npr.org/sections/thetwo-way/2017/10/26/560263997/pharmaceutical-founder-arrested-in-alleged-nationwide-opioid-scheme. Excerpt:
On the same day President Trump declared the opioid epidemic a public health emergency, the co-founder of a prominent opioid medication manufacturer has been arrested on fraud and racketeering charges. John Kapoor, former CEO of Insys Therapeutics, has been charged with conspiring to push the company's signature drug for unacceptable uses through a series of bribes and kickbacks.
Subsys, as the drug is known, transmits the extremely powerful narcotic fentanyl in spray form, allowing it to be placed beneath the tongue for fast, potent pain relief. It is meant only for treating cancer patients suffering from severe pain.
But according to prosecutors, Kapoor and several other former high-ranking executives at the company conspired to bribe doctors to write "large numbers of prescriptions for the patients, most of whom were not diagnosed with cancer." They also allegedly "conspired to mislead and defraud health insurance providers who were reluctant to approve payment for the drug when it was prescribed for non-cancer patients."
10) This cracked me up: People in Russia are renting out grounded private jets by the hour just to take Instagram photos — here's what it costs, http://www.businessinsider.com/moscow-company-sells-instagram-photoshoots-on-grounded-private-jets-2017-10. Excerpt: