Whitney Tilson
Mon, Nov 19, 2018|Whitney Tilson

2 podcasts, China, Apple, Google, Facebook

1. I did two podcasts last week, the first with Seeking Alpha: Whitney Tilson On Value, Reinvention, And The Hedge Fund Business (70 minutes). Here's a summary:

  • In a bonus podcast, hedge fund industry veteran Whitney Tilson shares his thoughts on the future of value investing and what aspiring fund managers need to know.
  • We talked about what it takes to succeed as an active manager as well as the psychological pitfalls all investors need to avoid.
  • The key question aspiring money managers need to ask themselves: Am I skilled, or just a bull market genius?

    Here's the table of contents:

    • The difference between entrepreneurship and portfolio management -- 1:00
    • The quiet genius portfolio manager vs. the marketing side of raising money -- 7:45
    • How not to blow yourself up -- 12:00
    • Tilson's regrets about his hedge fund career -- 18:00
    • The future of concentrated, long-short value investing -- 24:00
    • What Tilson tells students who may not be ready to start their own fund -- 32:00
    • The danger of cognitive bias and psychological traps -- 45:00
    • The Kase short selling conference and what Kase Learning is all about -- 60:00

    2. My second podcast was with Value Walk, focused more on short selling: Shorting with Whitney Tilson (68 minutes)

    3. The cryptocurrency and cannabis sectors continue their implosions, as I predicted. Don't be tempted – there's still a long way to fall in both sectors!

    4. This is an outstanding, insightful NYT article about one of the most important, remarkable events of all time, the rise of China's economy over the last few decades: The Land That Failed to Fail. Excerpt:

    The Chinese economy has grown so fast for so long now that it is easy to forget how unlikely its metamorphosis into a global powerhouse was, how much of its ascent was improvised and born of desperation. The proposal that Mr. Xu took from the mountain retreat, soon adopted as government policy, was a pivotal early step in this astounding transformation.

    China now leads the world in the number of homeowners, internet users, college graduates and, by some counts, billionaires. Extreme poverty has fallen to less than 1 percent. An isolated, impoverished backwater has evolved into the most significant rival to the United States since the fall of the Soviet Union.

    An epochal contest is underway. With President Xi Jinping pushing a more assertive agenda overseas and tightening controls at home, the Trump administration has launched a trade war and is gearing up for what could be a new Cold War. Meanwhile, in Beijing the question these days is less how to catch up with the West than how to pull ahead — and how to do so in a new era of American hostility.

    The pattern is familiar to historians, a rising power challenging an established one, with a familiar complication: For decades, the United States encouraged and aided China's rise, working with its leaders and its people to build the most important economic partnership in the world, one that has lifted both nations.

    During this time, eight American presidents assumed, or hoped, that China would eventually bend to what were considered the established rules of modernization: Prosperity would fuel popular demands for political freedom and bring China into the fold of democratic nations. Or the Chinese economy would falter under the weight of authoritarian rule and bureaucratic rot.

    But neither happened. Instead, China's Communist leaders have defied expectations again and again. They embraced capitalism even as they continued to call themselves Marxists. They used repression to maintain power but without stifling entrepreneurship or innovation. Surrounded by foes and rivals, they avoided war, with one brief exception, even as they fanned nationalist sentiment at home. And they presided over 40 years of uninterrupted growth, often with unorthodox policies the textbooks said would fail.

    5. My friend Marcelo Lima is quoted in this Barron's article: Why Apple's Stock Slide Could Continue. Excerpt:

    Marcelo Lima, a hedge fund manager at Heller House, sees a big opportunity for Apple to increasingly monetize its existing install base of over a billion active devices.

    "Apple obviously has growth challenges because the iPhone is quite saturated, and there's only so much they can keep pushing pricing," Lima wrote in an email. "I subscribe to my iPhone; I pay $60 a month and can get a new iPhone every year. What if Apple increased that and bundled original video content, music, and other services? I bet a lot of people would subscribe to that."

    6. I am neutral on Apple and very bullish on Google, for reasons I outlined in this article, published July 25: Why I like Alphabet more than Apple — and Buffett doesn't (also, see my slide presentation on GOOGL and FB, posted here). Since then, AAPL is only down 5% whereas GOOGL is down 20%, making me like GOOGL even more. Excerpt:

    Alphabet (better known as Google), with a market cap of $856 billion, trails only Apple ($948 billion) in the race to be the first company to achieve a market cap of $1 trillion. Apple will likely get there first but my money — unlike my investing hero, Warren Buffett — is on Alphabet significantly outperforming Apple in the long run because it has a better business model, is growing much faster, and is likely to continue doing so.

    To be clear, both are insanely great companies and I think Apple's stock will also do well going forward — just not as well as Alphabet's.

    7. I think Facebook's stock will do very well from here (hence I own it), but I am thoroughly disgusted by the arrogant, devious and obtuse behavior by Zuckerberg and Sandberg, as documented in this devastating NYT article: Delay, Deny and Deflect: How Facebook's Leaders Fought Through Crisis. Excerpt:

    ... as evidence accumulated that Facebook's power could also be exploited to disrupt elections, broadcast viral propaganda and inspire deadly campaigns of hate around the globe, Mr. Zuckerberg and Ms. Sandberg stumbled. Bent on growth, the pair ignored warning signs and then sought to conceal them from public view. At critical moments over the last three years, they were distracted by personal projects, and passed off security and policy decisions to subordinates, according to current and former executives.

    Here are a range of related follow-up articles and opinion pieces:

    8. In addition to this investing email list, I have eight others – if you'd like to be added to any of them, just click the link and send a blank email (most average two emails/week, with politics being more frequent):

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