Whitney Tilson: These Are The Three Most Dangerous Words In Investing

Whitney Tilson: These Are The Three Most Dangerous Words In Investing

Whitney TIlson’s email to investors asking to subscribe in advance to his newsletter; Stock Idea of the Day: Adient (ADNT); The Three Most Dangerous Words in Investing.

1) A number of folks have e-mailed me to say that they’d like to subscribe to the Empire Investment Report and want to take advantage of the special offer we’ll be making as part of the webinar that starts at 8 p.m. Eastern time tomorrow, but they have a scheduling conflict.

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I want every one of my friends and readers to get the best deal we're ever going to have –including an offer for a lifetime subscription to not only the Empire Investment Report but also every other publication we ever launch at Empire Financial Research – so we've created a private website where you can sign up anytime between now and midnight tomorrow (Eastern time). The price goes up after that, so please don't wait.

We're so confident that you'll be happy with it that we're offering a 30-day, no-questions-asked, money-back guarantee.

Every month I'll be sharing my absolute best stock ideas with my subscribers. Over time, my analysts and I will build a portfolio of two or three dozen companies we follow closely, always ranking our top dozen or so whose stocks we recommend owning at any given time.

In many ways, it will be exactly what I did for nearly two decades running various funds: a lot of reading, talking to folks, researching, analyzing, and thinking – with the goal of coming up with one good investment idea a month. The only difference is that, instead of manifesting that idea by acting on it myself on behalf of the handful of high-net-worth investors in my fund, I'll share it with my subscribers so they can buy it for themselves.

And as a special bonus, every person who becomes one of our charter subscribers will get FREE access for a full year to our "Lessons from the Trenches: Value Investing Bootcamp" – a $995 value. The 36-hour video series includes 32 teaching modules – totaling 24 hours, five guest speakers, and 57 answers to questions.

2) Today's Stock Idea of the Day is Adient (ADNT). The stock of this auto-seat maker has gotten obliterated over the past year, falling from $66 to $12, but has doubled in the past two weeks, coinciding with this write-up that was posted on SumZero. A smart friend of mine commented:

We still like it. It's been a wild ride and honestly the stock has option-like characteristics. There's some measurable chance they fall into financial distress (cash flow is currently low and they have real debt)... but if they make it through (and we think they will), the company could earn $10+ one day.

That seems a long way off right now, but just in 2017 they earned $9 and that was with no profits from metals. If they restructure metals, get a little momentum back in seating, see a bounce in China and get the flow through of earnings from the Boeing seating JV... it is conceivable they get back there and the stock is 3-4x higher than today. It will take a lot of work and some time to get there, but it seems like a good risk/reward. Also, no one is really focused on it at the moment, but their China JVs have about $8 in net cash attributable to ADNT which is 40% of the mkt cap.

If you know the company and have any comments, I'd love to hear them!

3) I'm continuing the series of articles I'm publishing leading up to the webinar with this one: The Three Most Dangerous Words in Investing. Excerpt:

The common cliché on Wall Street is that the four most dangerous words in investing are, "This time is different."

But I've found a three-word phrase that's uttered just as frequently... and is arguably even more dangerous.

"I missed it."

You've probably grumbled these words before. Especially if you've ever passed on a stock you were considering buying... then watched as it marched to new high after new high.

The thing is, a great run higher doesn't necessarily mean it's too late to buy.

Today, I'll show you why this simple, three-word phrase can be so misleading...

In my decades as a value investor, I've seen it time and time again.

Value investors like me tend to look in the bargain bin for beaten-up stocks that are trading at 52-week (if not multiyear) lows. They get a sense of satisfaction from getting a better deal than the guy who bought it a month or a year ago.

It's a great strategy if – and this is a big if – you can correctly identify companies whose fundamentals turn around. The key here is to avoid value traps: the companies that never turn around, and thus their profits (and stocks) keep falling and falling...

But what about stocks that never really fall out of favor and end up in the bargain bin? We value investors often miss them.

Best regards,


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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver

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