Whitney Tilson Is No Longer Bearish On All Cryptos

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Whitney Tilson’s email to investors discussing that he is no longer bearish on all cryptos; he might be wrong on Hertz (OTCMKTS:HTZGQ); Dogecoin rips in meme-fueled frenzy on pot-smoking holiday.

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No Longer Bearish On All Cryptos

1) Given how bearish I've been about cryptocurrencies – calling them "a techno-libertarian pump-and-dump scheme" and nailing the December 2017 bitcoin top to the hour – I wanted to share with all of my readers an excerpt of what I wrote in last month's edition of our flagship Empire Stock Investor newsletter entitled "The Most Unexpected Recommendation in Empire Financial Research History":

I think [my colleague] Enrique [Abeyta] is right that at least some forms of digital assets will have real – and growing – value. In particular, you may be surprised to learn that my views on certain cryptocurrencies ("cryptos") have evolved since I called the previous top of bitcoin in late 2017.

It comes back to the Rembrandt analogy. While one of these works of art can't be valued based on any known valuation formula and is therefore definitionally a speculation (evaluated solely as an investment), it clearly has value because, over time, many people have been willing to pay ever-increasing prices for these artistic masterpieces.

In other words, if a large number of people believe something has value – and are willing to pay cold, hard cash for it – then it has value, regardless of whether it produces cash flow.

The question, therefore, is whether something is likely to have sustained, growing value over time, relative to today's price. In the case of a Rembrandt, the answer is likely yes. In the case of Dutch tulip bulbs, the answer was no.

So where do cryptos fall on this spectrum?

I don't know for sure... Most, no doubt, will end up worthless. But it's also become clear to me that some – bitcoin and a few others – have reached a critical mass in which enough people believe in them that their values are more likely to go up than down.

As I often say, here at Empire Financial Research, we aren't value investors or growth investors. We're make-money investors.

That's why – despite my previous skepticism – we're recommending our favorite cryptocurrency in this month's issue of Empire Stock Investor. Yes, it's a speculation (so size it accordingly!), but we think it's a good speculation...

I'm pleased to see that it's already up 20% in only two weeks since we recommended it.

If you'd like to read the full write-up and get all back issues, you can subscribe to Empire Stock Investor for only $49 for the first year – just click here. The newsletter is approaching 100,000 subscribers, who always get our best ideas first.

Wrong On Hertz

2) Speaking of changing my viewpoint on something, it's possible that I'll be proven wrong on Hertz (OTCMKTS:HTZGQ), one of the 25 stocks I named in my January 28 e-mail as part of my "Short Squeeze Bubble Basket"...

I predicted that these stocks (or "stonks," to use the term reflecting the speculative bubble they were in) would be down 30%, 50%, and 80% within one, three, and 12 months, respectively. Sure enough, they crashed by 30% within a week, and my three-month prediction is close, with a week to go – the basket is down 45% as of yesterday's close, with every single stock in the red. The best performer, Macy's (M), is down 6% versus an 11% gain for the S&P 500 Index.

But there's one stock among these turds I might end up being wrong on: car-rental giant Hertz, which, much to my surprise, is the fourth-best (least bad?) performer, "only" down 11%.

Had you told me at the end of January that the stock of this bankrupt company would be among either the best or the worst performers in my basket, I would have bet heavily on the latter.

But, remarkably, thanks to the incredible vaccines and the strong vaccination campaign that have led to a sharp drop in COVID-19 cases, Americans are traveling again. This has led to a surge in car rentals (and pricing – rates are up as much as 10 times in some locations), which is great news for Hertz and its peers – including Avis Budget (CAR), which is up 82% since January 27.

The result is a bidding war among groups competing to take Hertz out of bankruptcy, as this Bloomberg article highlights: Hertz Gets Sweetened Offer as Bankruptcy Bidding War Escalates. In the vast majority of bankruptcies, the equity (i.e., shareholders) are wiped out, but in this case there might be some recovery. Excerpt:

The battle over ownership of Hertz has been heating up. The company earlier this month picked a plan from Centerbridge Partners, Warburg Pincus, and Dundon Capital Partners that outbid an earlier Knighthead deal.

Last week, Knighthead and Certares responded with a plan that assigned Hertz an enterprise value of around $6.2 billion, paid senior lenders and unsecured bondholders in full, and offered existing equity holders a shot at recovery. The deal was backed by investors including Apollo Global Management.

In summary, I'm not recommending Hertz's stock – it's still highly risky and could be a zero – but it's no longer the certain-to-be-worthless speculation I once thought it was.

Dogecoin Rips in Meme-Fueled Frenzy on Pot-Smoking Holiday

3) While I've changed my view on a few cryptocurrencies, I certainly haven't about Dogecoin, whose market cap of roughly $50 billion exceeds that of Ford Motor (F)! This is one of the silliest things I've ever seen: Dogecoin Rips in Meme-Fueled Frenzy on Pot-Smoking Holiday. Excerpt:

Fans are driving Dogecoin higher to mark a day known for celebrating pot smoking.

The Shiba Inu-themed token traded to nearly $0.42 on Tuesday, further stoking the social media frenzy that's being propelled by the #DogeDay hashtag trending on Twitter on April 20, or 4/20 – pot-user slang for smoking cannabis.

Best regards,


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