Whitney Tilson’s email to investors discussing his reflections on two decades in the value investing business.
I hope you had wonderful holidays and a happy new year! I just got back from an amazing two weeks with my family in Kenya, visiting my parents, sister and nephew who live there.
Kenya is a fantastic country – if you haven’t been, you really must go! And it’s now much easier to get to, with the initiation in October of the first nonstop flight from the U.S. (JFK to Nairobi daily in a new 787 Dreamliner; hint: buy a coach ticket and then bid $1,100 to upgrade to business class – a great deal for a 13+ hour flight).
Q3 hedge fund letters, conference, scoops etc
I’ve posted pictures and descriptions of our trip in three Facebook posts here, here and here. In addition to family time and going on safari, an unexpected bonus was learning to kitesurf over the past week (posts here, here and here) – what an awesome sport!
Reflections on my two decades in the value investing business
January 1st marked the 20th anniversary of launching my first fund and my professional investment career so I thought I’d share some reflections and thoughts in this email (after I discuss our seminars, which are now available on video for the first time).
Overall, it’s been an incredible journey – there have been some epics highs and tough lows, but I wouldn’t trade it for anything!
My main regret, as I discuss at length below, is that I rashly rushed into the business without anything close to the training and experience I should have had. Investing and launching/running a fund – two very different skills – cannon truly be learned from a book or in a classroom. Rather, this is an apprenticeship business and there’s simply no substitute for being mentored by people with a lot of experience.
This is what Glenn and I have been doing over the past year, developing and teaching dozens of modules, all rooted in real-world case studies, that capture the most important lessons we’ve learned over our combined half century of experience. We’ve broken it down into a core program, our Lessons from the Trenches: Value Investing Bootcamp (36 hours), plus two shorter seminars on How to Launch and Build an Investment Fund (12 hours) and an Advanced Seminar on Short Selling (10 hours).
These programs are designed not only for professionals but also avid amateurs who simply want to become better investors. In them, we share everything we’ve learned about finding great investments (both long and short), avoiding value traps, sound portfolio management, launching and building multiple hedge funds and mutual funds, life lessons like cultivating mentors and avoiding calamities, and many other topics. We also answer all questions, and include veteran investors as guest speakers to share their wisdom. Our goal is to help the next generation of investors stand on our shoulders and achieve even greater success. It’s equal doses of learning, self-improvement and fun!
We’ve taught all three seminars multiple times, both in person and via webinar, to hundreds of participants from every corner of the globe, at every level, from college students to retirees, to young analysts at big funds to seasoned industry veterans.
The incredible feedback we’ve received reinforces our view that what we’re teaching is unique – to my knowledge, no one else is teaching this – and valuable. I’m biased of course, but I think it’s worth exponentially more than what we’re charging for it. For some investors, in fact, it could literally be worth millions of dollars.
I know because I’m one of them: I’m not exaggerating when I say that I’d gladly pay $1 million to send a video of our seminars back in time to my younger self. I built a heck of a business from scratch, growing assets from $1 million to $200 million, but if I’d known even a fraction of what we’re now teaching, I would have made much more during the good years – and avoided some fateful mistakes that ultimately cost me my business.
To be clear: if you’re investing, either for your own account or, especially, for others, and you haven’t been an apprentice for many years and/or suffered big losses in the fourth quarter last year, then I’m 100% certain that you will learn a lot from our programs.
We’re working on a new investment newsletter, so have suspended live teaching for a while, but for the first time (and only for a limited time), we are making videos available online of all three of the programs. Here is the pricing for each:
USE VW10 for a 10% discount for our readers
- Lessons from the Trenches: Value Investing Bootcamp: $995. Register here.
- How to Launch and Build an Investment Fund: $495. Register here.
- Advanced Seminar on Short Selling: $495. Register here.
(Further details are in this email that I sent a couple of weeks ago and on our website.)
I suspect that almost everyone on this email list is – or will be over their lifetimes – investing millions of dollars. If even one thing we teach helps you make a single good decision – or avoid a bad one – then you will earn at least 100x on your money. It’s the ultimate no-brainer.
After we launch our newsletter, we will no longer be selling the videos, so please register now! Once you do so, you have a full year to watch and re-watch them.
To give you an idea of what we’re teaching, we’ve made available for free the introduction/overview/agenda video as well as an excerpt from the first teaching module of each program – to watch them, simply click the “Register here” links above.
The combined price of these three programs is $1,985, but if you register for the bootcamp and either seminar, we’ll give you the other one for free – reducing the total cost by 25% to $1,490.
We want to make our programs affordable to young investors and students, so are offering a 25% discount to anyone under age 30 and a 50% discount to any full-time student. To take advantage of this, simply take a picture of your drivers license (or anything else that has your date of birth on it) or your student ID, email it to me, and I’ll send you a discount code you can use.
Please email me as soon as you register for any of our programs and I’ll send you the link to a folder with all of the slides we teach from plus plenty of background materials.
Please let me know if you have any questions, and I welcome your feedback!
My history/reflections/thoughts
I’ve been so fortunate to have the best parents anyone could possibly wish for, but they were teachers and knew nothing about business or investing growing up. Nevertheless I developed an early interest in the former – I still remember sitting in on a class at Harvard Business School during my sophomore year of college and knew immediately that I wanted to go there – but I didn’t start learning about investing until the mid-1990s, after HBS, as I was approaching the age of 30 (which is very late!).
Necessity being the mother of invention, I first started to take an interest in investing for the simple reason that I had the first savings of my life. My wife and I got married in 1993 (we just celebrated our 25th anniversary!) and, even though I was earning very little at my job working with Prof. Michael Porter running a nonprofit called The Initiative for a Competitive Inner City, she had a good salary as a lawyer and we lived frugally so after a few years we finally paid off my business school debt and saved our first $10,000. I thought I was rich!
I wanted to invest this money so I called my college buddy Bill Ackman, who was then running his first hedge fund, Pershing Square, to ask for his advice. I still remember his exact words: “Read everything Warren Buffett’s ever written…and you can stop there. That’s all you need to know.”
I took his advice – and was quickly hooked. For someone raised by parents who knew how to squeeze a dollar until it screamed – we almost never ate out and only bought used cars and clothes – the investment approach of trying to buy dollar bills for fifty cents immediately resonated with me (though not without a few painful lessons buying speculative stocks based on hot stock tips!).
I did, in fact, read everything I could by and about Buffett and started going to every Berkshire Hathaway annual meeting (I attended my 21st in a row last May). I also started investing our savings and, a bit later, an account for my parents.
To my delight, most of the stocks I picked went up – some by a lot! I remember investing the entire $20,000 in my wife’s retirement account in AOL stock in late 1997 and watching it turn into $120,000 a year later (that’s real money now, but it was mind-blowing money to me back then!). Then, right near the top, I sold it and bought two Berkshire A shares – one of my best trades ever!
I soon came to believe that I was God’s gift to investing – that’s what making some quick money will do (plus I was pretty full of myself, with my fancy Harvard degrees and all). But in truth, I now realize that I was little more than a bull market genius (like so many investors today who are licking their wounds after getting decimated in the fourth quarter).
I’m sure you know the saying, “don’t confuse brains with a bull market.” Well, I sure did: I had gotten lucky and stumbled into the last blow-off phase of the long bull market that started in 1982 and ended with the insanity of the Internet Bubble 17 years later.
Filled with hubris, I decided to launch my own hedge fund in November 1998 and opened for business on January 1, 1999 with $1.1 million from four investors: my parents, my in-laws, Bill Ackman’s dad, and myself.
Today, I tell every young person not to do what I did: start managing other peoples’ money without having spent a day in the financial industry, much less at a hedge fund. As I noted earlier, this is an apprenticeship business and I hadn’t gotten the training, experience and mentorship everyone should have before launch a fund. So, by all rights, I should have fallen on my face and failed.
But the opposite happened: I started putting up good numbers, largely escaped the meltdown of the tech sector from 2000-2002 (during which the Nasdaq fell 80%), and over the next dozen years nearly tripled my investors’ money in a flat market – and my assets swelled to $200 million.
Looking back, I see that I was very lucky – it was a good decade for value investors and hedge funds were the hot new thing – but I also created my own luck by working very hard and becoming an investing learning machine, sucking up knowledge and experience. There are only two ways to get experience: doing things yourself, which inevitably means making mistakes (I made plenty!) or learning from others, the method I highly recommend. So I sat in on Joel Greenblatt’s class at Columbia Business School, read voraciously, went to every Berkshire meeting, and cultivated incredible mentors like Buffett, Munger, Ackman, Greenblatt, Klarman and many others.
I learned a lot, but not enough: eventually my lack of experience led me to make a series of mistakes – among them, a partnership that eventually didn’t work as well as too much trading, leverage, and short selling – that got me in a hole in 2011 and resulted in the dissolution of my partnership with Glenn in 2012.
I cleaned up the portfolio and relaunched on my own in 2013, but made one big mistake: for most of the last six years, I’ve felt like the market was ahead of the fundamentals, so I invested very conservatively, holding a lot of cash, maintaining a good-sized short book, and quickly trimming/exiting my winners. I owned some great stocks – for example, Netflix at the bottom, a 37-bagger ago! – but started trimming after it doubled and exited entirely after a five-bagger.
My defensive positioning was, of course, exactly wrong and led to year after year of trailing the market, which was immensely frustrating for both me and my investors. I felt like I was out of sync with the market, had lost my mojo, and was letting my investors down, which made me increasingly miserable so I finally threw in the towel in September 2017.
As I contemplated what to do next, I realized that I’ve always loved teaching and mentoring – and saw a gaping hole in the market for high-level investing courses – so I launched Kase Learning shortly thereafter and created and started teaching the seminars discussed above (details on our website at www.kaselearning.com).
There’s an ethos in the value investing community of giving back/paying it forward, which I’ve always embraced wholeheartedly, so I’ve done my best to teach others over the years via these emails, co-authoring three books, writing regular columns for numerous websites and publications, transcribing and circulating the first full collection of the Buffett Partnership letters and many of Munger’s best-known speeches, sharing my extensive notes at the Berkshire and, later, Wesco meetings, etc.
The seminars as well as these emails are part of my two-decade-long effort to both learn and give back. I hope you enjoy them!
Best regards,
Whitney
