Economics

Whitney Tilson: Do Not Panic I Am Bullish On Facebook And Google

Excerpted from Whitney Tilson’s latest email to colleagues

1) I did two podcasts last week, the first with Seeking Alpha: Whitney Tilson On Value, Reinvention, And The Hedge Fund Business (70 minutes). Here’s a summary:

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  • In a bonus podcast, hedge fund industry veteran Whitney Tilson shares his thoughts on the future of value investing and what aspiring fund managers need to know.
  • We talked about what it takes to succeed as an active manager as well as the psychological pitfalls all investors need to avoid.
  • The key question aspiring money managers need to ask themselves: Am I skilled, or just a bull market genius?

Here’s the table of contents:

  • The difference between entrepreneurship and portfolio management -- 1:00
  • The quiet genius portfolio manager vs. the marketing side of raising money -- 7:45
  • How not to blow yourself up -- 12:00
  • Tilson's regrets about his hedge fund career -- 18:00
  • The future of concentrated, long-short value investing -- 24:00
  • What Tilson tells students who may not be ready to start their own fund -- 32:00
  • The danger of cognitive bias and psychological traps -- 45:00
  • The Kase short selling conference and what Kase Learning is all about -- 60:00

2) My second podcast was with Value Walk, focused more on short selling: Shorting with Whitney Tilson (68 minutes)

3) The cryptocurrency and cannabis sectors continue their implosions, as I predicted. Don’t be tempted – there’s still a long way to fall in both sectors!

4) This is an outstanding, insightful NYT article about one of the most important, remarkable events of all time, the rise of China’s economy over the last few decades: The Land That Failed to Fail. Excerpt:

The Chinese economy has grown so fast for so long now that it is easy to forget how unlikely its metamorphosis into a global powerhouse was, how much of its ascent was improvised and born of desperation. The proposal that Mr. Xu took from the mountain retreat, soon adopted as government policy, was a pivotal early step in this astounding transformation.

China now leads the world in the number of homeowners, internet users, college graduates and, by some counts, billionaires. Extreme poverty has fallen to less than 1 percent. An isolated, impoverished backwater has evolved into the most significant rival to the United States since the fall of the Soviet Union.

5) My friend Marcelo Lima is quoted in this Barron’s article: Why Apple’s Stock Slide Could Continue. Excerpt:

Marcelo Lima, a hedge fund manager at Heller House, sees a big opportunity for Apple to increasingly monetize its existing install base of over a billion active devices.

“Apple obviously has growth challenges because the iPhone is quite saturated, and there’s only so much they can keep pushing pricing,” Lima wrote in an email. “I subscribe to my iPhone; I pay [about] $60 a month and can get a new iPhone every year. What if Apple increased that and bundled original video content, music, and other services? I bet a lot of people would subscribe to that.”

6) I am neutral on Apple and very bullish on Google, for reasons I outlined in this article, published July 25: Why I like Alphabet more than Apple — and Buffett doesn’t (also, see my slide presentation on GOOGL and FB, posted here). Since then, AAPL is only down 5% whereas GOOGL is down 20%, making me like GOOGL even more. Excerpt:

Alphabet (better known as Google), with a market cap of $856 billion, trails only Apple ($948 billion) in the race to be the first company to achieve a market cap of $1 trillion. Apple will likely get there first but my money — unlike my investing hero, Warren Buffett — is on Alphabet significantly outperforming Apple in the long run because it has a better business model, is growing much faster, and is likely to continue doing so.

To be clear, both are insanely great companies and I think Apple’s stock will also do well going forward — just not as well as Alphabet’s.

7) I think Facebook’s stock will do very well from here (hence I own it), but I am thoroughly disgusted by the arrogant, devious and obtuse behavior by Zuckerberg and Sandberg, as documented in this devastating NYT article: Delay, Deny and Deflect: How Facebook’s Leaders Fought Through Crisis. Excerpt:

…as evidence accumulated that Facebook’s power could also be exploited to disrupt elections, broadcast viral propaganda and inspire deadly campaigns of hate around the globe, Mr. Zuckerberg and Ms. Sandberg stumbled. Bent on growth, the pair ignored warning signs and then sought to conceal them from public view. At critical moments over the last three years, they were distracted by personal projects, and passed off security and policy decisions to subordinates, according to current and former executives.

Here are a range of related follow-up articles and opinion pieces:

8) In addition to this investing email list, I have eight others – if you’d like to be added to any of them, just click the link and send a blank email (most average two emails/week, with politics being more frequent):