Whitney Tilson – Lessons from 15 Years of Short Selling

From Whitney Tilson’s latest email to investors on shorselling


We’re teaching our three programs again in NYC on June 12-16 (only two weeks from today!) and then less than a month later in London on July 7-11 Pease use “VW10” for a discount!

Charlie Munger: Invert And Use “Disconfirming Evidence”

Charlie MungerCharlie Munger is considered to be one of the best investors and thinkers alive today. His thoughts and statements on investment research, investment psychology, and general rational behavior are often incredibly insightful. Anyone can learn something from this billionaire investor and philosopher. Q2 2020 hedge fund letters, conferences and more If you’re looking for value Read More

  • In NYC, we’ll start with our new one-day program, an Advanced Seminar on Short Selling on June 12. Then we’ll teach our three-day Lessons from the Trenches investing bootcamp June 13-15, followed by a one-day seminar on How to Launch and Build an Investment Fund on Saturday, June 16. To register, go to: http://bit.ly/KL-6-18 (The only room the NY Athletic Club has available only fits 24 people (we had 33 earlier this month), so don’t delay!)
  • In London, we’ll start with the three-day bootcamp on July 7-9, then the seminars on How to Launch and Build an Investment Fund and short selling on the 10th and 11th, respectively. To register, go to: http://bit.ly/KL-7-18

Pease use “VW10” for a discount!

(Further information is at www.kaselearning.com and www.tilsonfunds.com/KaseLearning.pdf)

2) Seeking Alpha just published this interview, in which I share my advice with those thinking of starting their own funds as well as those seeking to grow exisiting ones. Interview With Whitney Tilson: The Launch Of Kase Learning And Running A Hedge Fund, https://seekingalpha.com/article/4177128-sa-interview-whitney-tilson-launch-kase-learning-running-hedge-fund. Excerpt:

…the vast majority of people are better off – now and forever – developing and applying their skills within a larger organization, having a successful career, rather than being entrepreneurs.

…Growing a fund is really hard and very few people succeed in doing it. I can’t tell you how many energetic, talented young investors I’ve seen over the years launch funds, get to $5-10 million under management, and then stall out, never growing beyond this. At this size, the business is losing money – not to mention the opportunity cost of not having a job and earning a salary – so these folks are just bleeding, year after year, refusing to give up on their dream…but it never materializes.

… prospective investors need to be wooed. But instead of doing this, I did the dating equivalent of swiping them on Tinder and then immediately made a marriage proposal. Not surprisingly, few people took me up on my offer.

… This is a business where you have to make hay when the sun is shining. The sun shone on me for a dozen years and I did well  – I’m not complaining about my lot in life  – but I feel enormous regret knowing that I only made a fraction of what I should have made because I didn’t recognize and take full advantage of the opportunity.

In the next stage of my life with Kase Learning, I want to help the next generation of entrepreneurial investors like me achieve similar success  – and take full advantage of it!

3) One of our students, Gabriel Grego of Quintessential Capital Management, exposed Folli Follie as a total fraud during his presentation at our shorting conference on May 3. The stock immediately plunged by 70% and last Friday the shares were halted (and, I suspect, will never trade again). Kudos Gabriel! Here is a Bloomberg article about it:

Folli Follie Suspended Amid Lack of Data Over its Financials

2018-05-25 13:54:41.511 GMT

By Marcus Bensasson and Luca Casiraghi

(Bloomberg) — Greek market regulators suspended trading on FF Group shares, citing the company’s inability to provide data on its financial health following a report by a hedge fund questioning the retailer’s reach.

The Hellenic Capital Markets Commission said in a statement Friday that the company “declared its inability to provide data regarding its financial statements.” The retailer earlier said

it had requested a halt to trading until accounting firm EY completes an audit of its accounts.


(Speakers from the conference

4) In the weeks before the conference I wrote a four-part series on short selling, Lessons from 15 Years of Short Selling, which you can read here:

5) I’ve been reading about how global consumer products companies are under pressure, which is why most of their stocks are down quite a bit, so on a lark I decided to pull up the revenues and operating income, going back decades, for two of the most iconic companies in the space, Coca-Cola and PepsiCo.

I expected weakness, but the reality was much worse than I expected. As you can see in the charts below:

  1. a) Coke’s revenue has declined five years in a row, totaling 26% (though the 15% drop in 2017 is mostly due to refranchising). Operating income is also down five years running, a total of 14%. Coke is an incredible cash cow, but it’s hard to me to fathom how this clearly melting ice cube is consistent with a stock trading at 6.2x EV/Revenue, 17.5x trailing EBITDA, and 20.3x this year’s earnings estimates – plus it has 4.5 turns of debt!
  2. b) Pepsi is better, but still unattractive: revenue is “only” down 4.4% since the peak four years ago, and operating income has been flat for six years. And the stock is a bit cheaper (though still richly valued): 2.6x EV/Revenue, 13.0x trailing EBITDA, and 17.7x this year’s earnings estimates – and 3.4 turns of debt! (Both are paying a7% dividend yield.)