Slides and video of our presentation last week; Elon Musk Threatens to End Twitter Deal; Highflying Tiger Global Humbled by Unraveling of Giant Tech Bet; Dollar-weighted returns; Value Investing Seminar in Italy

1) Berna and I hosted an event in New York City for Empire Financial Research subscribers last Thursday, during which we gave presentations on five of our favorite stocks and discussed many more during the Q&A.

I shared our analysis of Berkshire Hathaway (BRK-B) and Meta Platforms (FB) and why we're bullish on the cannabis sector – highlighting our latest recommendation in Empire Investment Report.

Then Berna went through her in-depth research on Netflix (NFLX), and I shared Enrique's slides on his favorite idea today (he was sick, so he couldn't join us).

During the Q&A, I highlighted Twitter (TWTR), Berna discussed one of her highest-conviction small-cap names, Target (TGT), and Walmart (WMT), and we both explained why we think oil prices will remain much higher than the market expects them to for many years to come, which makes us bullish on energy stocks.

Just for our subscribers, we've posted the 75 slides we presented (plus 19 backup slides on Berkshire Hathaway) and the video of the entire event (including the Q&A) right here.

If you'd like to access the slides and video, you can become a subscriber – and receive a full year of our flagship newsletter, Empire Stock Investor – for only $49 by clicking here.

2) Speaking of Twitter, Elon Musk's latest antics made the front page of today's Wall Street Journal: Elon Musk Threatens to End Twitter Deal Over Lack of Information on Spam Accounts. Excerpt:

Elon Musk threatened to terminate his deal to buy Twitter in a letter accusing the company of not complying with his request for data on the number of spam and fake accounts on the social media platform.

Mr. Musk said Twitter has refused to provide the data necessary for him to facilitate his own evaluation of the number of spam and fake accounts. In April, Twitter accepted Mr. Musk's $44 billion bid to take over the company and go private.

In a letter to Twitter Chief Legal Officer Vijaya Gadde that was disclosed in a regulatory filing Monday, Mr. Musk's lawyer Mike Ringler said Mr. Musk is entitled to the requested data, in part so that he can facilitate the financing of the deal.

"This is a clear material breach of Twitter's obligations under the merger agreement and Mr. Musk reserves all rights resulting therefrom, including his right not to consummate the transaction and his right to terminate the merger agreement," Mr. Ringler wrote.

A Twitter spokesman said the company "will continue to cooperatively share information with Mr. Musk to consummate the transaction in accordance with the terms of the merger agreement." He added: "We intend to close the transaction and enforce the merger agreement at the agreed price and terms."

Shares of Twitter fell around 1.5% to $39.57 Monday; the all-cash deal is priced at $54.20 a share.

What's Musk going to pretend to be "surprised" about next – that there's prostitution in Las Vegas?

His claim that he didn't know about Twitter's problem with bots is so absurd – in fact, it was one of the main reasons he cited for wanting to buy the company! As this WSJ story reports, Elon Musk's Bot Problem on Twitter Is Extraordinary, "spam, fake, or inactive accounts make up the vast majority of his followers." Excerpt:

Whatever his intention in raising the issue, it is clear that Mr. Musk has had unusually extensive interactions with bots. As a habitual tweeter with more than 95 million followers, the Tesla (TSLA) CEO likely has far greater exposure and experience with fake and spam accounts than most on the social-media platform, researchers say. One estimate says spam, fake or inactive accounts make up the vast majority of his followers.

My take: I think there's an 80% chance that Musk will buy Twitter – the only question is, at what price?

The company has a very strong position – Musk would be laughed out of a Delaware court if he showed up and claimed that Twitter's bot problem constituted a "material adverse change" that allowed him to get out of the merger agreement he signed – so I think there's a good chance it will go through at $54.20. But there is a time and nuisance factor Twitter's board needs to consider, so I wouldn't be surprised if all parties agree to a price of, say, $49.95.

Either way, the stock is compelling at today's price near $40 per share...

3) As I read this story on the front page of today's WSJ about the catastrophic losses at one of the largest hedge funds in the world, Highflying Tiger Global Humbled by Unraveling of Giant Tech Bet, I was having déjà vu about what I wrote in yesterday's e-mail about ARK Invest's Cathie Wood... Excerpt:

Tiger Global Management rode the tech boom like no other investment firm. It was funding more startups than any other U.S. investor when the market peaked last year, and had tens of billions of dollars from pensions, endowments and rich clients riding on some of Silicon Valley's hottest stocks.

With tech values plunging, the New York firm is humbled. The market rout has vaporized years of gains in a matter of months, calling into question Tiger's big bets.

Fueling Tiger's rise was a double-barreled business: A stock-picking arm put money mostly into public companies, while its venture-capital funds invested in startups throughout the world. Both bet bigger on tech as the market crested, leaving the firm exposed on both fronts.

Tiger said in a note to investors last week that its hedge fund, which managed $23 billion at the end of 2021, was down 52% this year. That is one of the largest-ever losses by a hedge fund. Its other large stock fund – a long-only fund that managed $11 billion at the end of 2021 and doesn't short stocks – has lost 61.7%.

At the end of April, the rout had wiped out roughly two-thirds of the gains Tiger had made in those stock funds since its founding, estimates money manager LCH Investments.

4) That last sentence is correct but highly misleading because you have to dollar-weight the returns...

To see what I mean, let's say Tiger was up 1,200% since inception, but then "the rout... wiped out roughly two-thirds of the gains." So investors have still made 400%, right?

No, because this doesn't consider that investors – chasing the exceptional performance – added tens of billions of dollars at or near the peak and have now suffered hideous losses.

This phenomenon is true in mutual funds and exchange-traded funds ("ETFs") as well. For example, here are the assets of Cathie Wood's flagship ARK Innovation Fund (ARKK) over the past three years:

From only $1.9 billion at the start of 2020, assets rocketed to more than $27 billion at the peak last February – a nearly 15-fold increase.

Over this period, the fund "only" tripled in value, meaning the vast majority of the asset growth was driven by investors adding money and chasing performance – and, of course, got burned. Anyone who invested anywhere near the peak is down 50% to 70%!

5) I'm delighted to let you know that my friend Ciccio Azzollini and I will once again be hosting – for the 18th time! – our Value Investing Seminar in Trani, Italy (attendees fly into the nearby Bari airport) on July 7 and July 8 – starting a month from today!

We limit it to 50 people, many of whom share their latest thinking on where the best opportunities lie and outline their current favorite investment idea(s). It's fun, educational, and a great addition to any European vacation! You can learn more and register here.

Here's a picture of Ciccio and me with the port of Trani in the background:

And this is what our friend Guy Spier of Aquamarine Capital posted about it:

Best regards,

Whitney

P.S. I welcome your feedback at WTDfeedback@empirefinancialresearch.com.