Whitney Tilson’s email to investors discussing Tesla and the S&P 500 hit all-time highs; surveys; what explains the rally; ‘The Longest Unprofitable Short I’ve Ever Seen’; Blowout numbers from Target and Lowe’s.
Q2 2020 hedge fund letters, conferences and more
Tesla And The S&P 500 Hit All-Time Highs
1) Both the Tesla and the S&P 500 hit all-time highs yesterday. I don't know which is more astounding...
The Delbrook Resource Opportunities Master Fund LP declined 4.2% in September, bringing the fund's year-to-date performance to 25.4%, according to a copy of the firm's September investor update, which ValueWalk has been able to review. Q3 2021 hedge fund letters, conferences and more The commodities-focused hedge fund has had a strong year of the back Read More
Regarding the former, the S&P 500 has now soared 55% from its intraday low less than five months ago on March 23. I'm proud to say that part of my subject line in my daily e-mail that very day was, "Why this is the best time to be an investor in more than a decade," and I wrote of the free webinar my colleague Enrique Abeyta and I were hosting the next day:
I've given hundreds of presentations over the years, including many in which I warned investors about the great financial crisis long before the storm hit.
But I think this presentation is the most important of my life...
During the webinar, we'll explain, in great detail, why we've come to the firm conclusion that this is the absolute best time to be an investor in more than a decade. To borrow a phrase from one of my friends, "we're trembling with greed" right now.
That said, I didn't predict such a fast recovery to new highs – I thought it would take until the end of 2021 – and can't think of anyone who did. In fact, I conducted a survey of my readers 10 days before the bottom on March 13, asking the following question:
When do you think the S&P 500 will close higher than its February 19, 2020 peak of 3386.15 (this would require a rise of 36.4% from its close on March 12)?
I received 845 responses, broken down as follows:
Fewer than 12% of respondents guessed earlier than the end of September, and the median guess (including mine) wasn't until the end of next year.
Even after the big rally had started, there was still widespread skepticism. On April 13, with the S&P up 26% from its low only a few weeks earlier, I sent out another survey asking:
On March 23, 2020, the intraday low for the S&P 500 was 2,191.86. Do you think this will be the low for the year?
Of the 878 people who replied, 56% answered "No."
So much for the wisdom of crowds... (which, by the way, is a great book, by James Surowiecki).
What Explains The Rally
2) What explains such an astonishing move? As the New York Times' Andrew Ross Sorkin explains.
3) Meanwhile, Tesla is up 351% this year, from $418.33 on December 31 to yesterday's close at $1,887.09... giving the company a mind-boggling market cap exceeding $350 billion.
I've never seen anything like it (and continue to breathe a sigh of relief that I told my readers on October 24 – when Tesla was trading for less than $300 per share – that it was no longer a good short after the company surprised investors by reporting a profitable quarter).
But not every short-seller listened to me. As this Institutional Investor article notes – 'The Longest Unprofitable Short I've Ever Seen' – those shorting Tesla's stock have lost more than $21 billion this year!
My view on the stock hasn't changed since I last wrote about it in my July 23 e-mail:
I'm not pounding the table that Tesla's stock is a great short here. On the fundamentals, the company has a big lead in multiple enormous emerging markets, making this a very open-ended situation. Plus, to their credit, CEO Elon Musk and his engineers have consistently achieved things I wouldn't have thought possible. And, as for the stock, the cult around it is unlike anything I've ever seen.
Blowout Numbers From Target And Lowe's
4) It's feast or famine out there.
Most companies have gotten hammered by the pandemic and resulting lockdowns... but some are benefitting immensely, like Target (TGT) and Lowe's (LOW). I don't have an opinion on their stocks, but they just reported astounding second-quarter earnings results.
Target's same-store sales were up 24.3%, the fastest pace in the retailer's 58-year history – crushing analysts' estimates for a 5.8% increase. Meanwhile, Lowe's reported 34.2% comps, more than double estimates of 16.3%. Wow...