Fri, Apr 20, 2018|Whitney Tilson

From Whitney Tilson: reply to join my investing email list; slides on Berkshire, Google and Facebook; Kase Learning programs; conference on short selling; 4 events I'm hosting in Omaha; 4 articles; The Last Days of Whitney Tilson's Kase Capital

It's been a long time since we've been in touch – I hope you've been well!

1. Some folks have been on my email list since I launched my first fund and started writing in 1999 (!), but I don't want to email anyone who doesn't want to be on my list so I'm updating my database and asking for affirmative consent. It's super easy: if you'd like to be on my email list for investing-related emails like the one below roughly once a week, simply click here (investors-subscribe@mailer.kasecapital.com) and send a blank email. Otherwise, no need to reply – you won't hear from me again.

2. I have invested my children's college accounts in 50% Berkshire, 25% Howard Hughes (HHC), and 25% split evenly among AMZN, GOOGL, and FB. My latest, updated slide presentations on BRK, GOOGL and FB are posted at: www.tilsonfunds.com/BRK.pdf and www.tilsonfunds.com/TilsonGOOGFB.pdf.

3. After two decades of value investing, as the founder and manager of numerous hedge funds and mutual funds, I'm now teaching the next generation of investors via my new venture, Kase Learning, an educational platform offering a range of programs for people interested in becoming better investors (a three-day Lessons from the Trenches bootcamp) and launching and building a successful investment management business (a one-day seminar on How to Launch and Build an Investment Fund) – both taught regularly in NYC and, soon, other cities around the world. We're also teaching two programs for high school and college students in NYC the week of June 18-22: An Introduction to Economics, Business, Finance and Investing and An Advanced Seminar on Finance and Investing. Further information is attached and at www.kaselearning.com.

4. I'm particularly excited about a best-ideas conference we've organized, The Art, Pain and Opportunity of Short Selling, which will take place in NYC on Thursday, May 3, only 13 days from now. If you'd like to join us, see below for a special 20% discount code.

The idea for the conference is rooted in the fact that this long bull market has inflicted absolute carnage among short sellers, and even seasoned veterans are throwing in the towel. This capitulation, however, combined with the increasing level of overvaluation, complacency, hype and even fraud in our markets, spells opportunity for courageous investors, so there is no better time for a conference focused solely on short selling.

This full-day event is the first of its kind dedicated solely to short selling and will feature some of the world's top practitioners who will share their wisdom, lessons learned, and best, actionable short ideas. Featured speakers include David Einhorn, Carson Block, Sahm Adrangi, Soren Aandahl, Ben Axler and many more (the full list is attached).

You can register at http://bit.ly/Shortconf – and use discount code FF20 to save 20% ($600) off the current early bird rate of $3,000. Don't delay, as the price jumps to $4,000 at midnight this coming Sunday.

I hope to see you there!

5. Two days after the conference on May 5 I will be attending my 21^st consecutive Berkshire Hathaway annual meeting. If you're going to Omaha as well, I'd like to invite you to four events that Glenn and I are hosting on Friday evening, Saturday afternoon and Sunday morning/afternoon. They are free, open to all, and will take place in the St. Nicholas Room (2^nd Floor) at the Hilton Omaha, right across the street from the CenturyLink Center where the meeting is held:

Our annual cocktail party from 8pm-midnight on Friday, May 4^th. No agenda, no speeches, no dress code – just come, enjoy the drinks and snacks, and meet other value investors.

A casual get-together immediately following the annual meeting (~3:30pm) on Saturday, May 5^th – just walk across the street or take the skybridge to the Hilton. It will end at 5:30pm.

A breakfast from 8-10am on Sunday, May 6^th during which we'll give a presentation and take questions about Kase Learning and our various programs.

After the breakfast from 10am-3pm, we'll take questions and share additional case studies and materials, in particular those from my upcoming book (due out in August), Whitney's Worldly Wisdom: Life Lessons I've Learned from Warren Buffett and Charlie Munger.

To RSVP for any/all of these events, please go to: https://kaselearning-berkshire-events-2018.eventbrite.com

6. After a long hiatus, I've started writing again. Here are links to the four articles I've published in the past month:

a. Lessons From 15 Years Of Short Selling: 12 Reasons Not To Short, https://seekingalpha.com/article/4152732-lessons-15-years-short-selling-12-reasons-short. Excerpt:

Short selling is brutally difficult, especially during a long, complacent bull market like this one.

Most investors would be better off learning about shorting – but not doing it – for a dozen good reasons.

But it's very healthy for our markets.

I think now is an excellent time to be looking at short ideas, which is why I've organized a conference around this.

b. Lessons From 15 Years Of Short Selling: 10 Reasons To Short, https://seekingalpha.com/article/4156799-lessons-15-years-short-selling-10-reasons-short. Excerpt:

Short selling is brutally difficult, especially during a long, complacent bull market like this one, so most investors would be better off learning about shorting, but not doing it.

That said, shorting can make sense for certain investors for 10 reasons.

c. An Open Letter to Reed Hastings: Do an Equity Offering Now, https://seekingalpha.com/article/4157812-open-letter-reed-hastings-equity-offering-now. Excerpt:

I am a huge admirer of Reed Hastings, a bold visionary striving to make his company a market leader in an enormous emerging global market

To do so, Netflix has been making big up-front investments, resulting in billions of dollars of negative free cash flow

To fund this deficit, Netflix has issued billions in debt

Carrying so much debt is risky – and makes little sense in light of Netflix's richly valued stock

Therefore, the company should do a large equity offering immediately

The same arguments hold true for Elon Musk and Tesla

d. Lessons From 15 Years Of Short Selling: How To Find Great Shorts, https://seekingalpha.com/article/4164016-lessons-15-years-short-selling-find-great-shorts. Excerpt:

Short selling is brutally difficult, but it can make sense for certain investors.

I think now is an excellent time to be looking at short ideas, which is why I've organized a conference around this.

The savviest short sellers focus on stocks valued on a multiple of earnings – and then correctly forecast an earnings collapse.

I focus on eight primary reasons that can cause a company's earnings to collapse.

7. Institutional Investor published an in-depth article last month about why I closed my hedge funds and launched Kase Learning, The Last Days of Whitney Tilson's Kase Capital (www.institutionalinvestor.com/article/b17f19gwp3595r/the-last-days-of-whitney-tilson's-kase-capital). Excerpt:

"I had lost my passion for the game," Tilson confided in a two-hour, soul-searching interview about the events that led him to shut down his hedge fund last September. After gaining 184 percent, net — when the broader market was up only 3 percent — during the first 11 and a half years of his hedge fund's existence, Tilson's returns had been floundering. Since 2010, Tilson says, he trailed the Standard & Poor's 500 stock index, and in 2017 he had lost almost 9 percent on the year by the time he shut down his fund. "In an ironic twist, I always built my firm to survive the worst storm, but it was a nine year bull market — complacency and sunshine — that took me out."

What distinguishes Tilson from many of his peers is his willingness to talk about the long, excruciating road down...

Tilson's introspection is uncommon for those in the hedge fund business, where self-confidence and salesmanship are as important to success as any investing prowess. As Tilson readily admits, managers cannot afford to be frank while they are going through turmoil, lest they further hurt their business — and their investors. "The last thing you want to do is air your dirty laundry. That will further shake the confidence of your investors."

But there's another reason for Tilson's uncommon openness: His experiences, both positive and negative, have led him to create a whole new business, turning Kase Capital into Kase Learning (Kase stands for the first letters of the names of Tilson's wife and three daughters). From a small conference room at the New York Athletic Club, Tilson has started teaching the perils and profits of investing in general — and running a hedge fund specifically — to aspiring youngsters who don't come out of big seeding platforms like Julian Robertson's Tiger Management or a multibillion-dollar hedge fund.

"Unless you are the lucky 1 percent who has the chance of learning in an apprenticeship, how are you supposed to learn how to do this?" Tilson says. "Nobody teaches the next generation. There is not one business school on the planet that teaches anything really usable to starting up your own hedge fund.

"It's so rare to talk to a manager who is injected with truth serum, isn't it?" he asks as he details his long bumpy journey through hedge fund land. "But I don't give a crap anymore."

Some of this is tough for me to read – it's pretty raw – but overall I'm pleased with it. It feels good, now that I'm not running anyone else's money, to be able to be totally (sometimes brutally) honest.

It's wild – and sort of cathartic – to share my experiences, with the many highs and almost as many lows from my nearly two decades in the hedge fund business. The folks I've been teaching since I closed my funds – mostly those who take my seminars, but also MBA students and others – have generally only heard money managers talking about their best stock picks and how brilliant they are, never about their mistakes and failures. But this is precisely what you should spend at least half of your time and energy studying if you really want to learn and maximize your chances of success – not just at investing, but anything.

But how can you study mistakes and failures if nobody is willing to talk about them? I think it's total negligence, for example, on the part of Harvard Business School (and, to be fair, every other business school I'm aware of) to overwhelmingly teach case studies that have heroic protagonists achieving great success. That's just not how the world works. Everyone screws up and encounters setbacks, both professional and personal.

Knowing this, your goal should be to reduce their frequency and, when they happen, to minimize their severity by dealing with them honestly and decisively. But how? Smarts, common sense, and high integrity are key, of course, but so is experience. And there are only two ways to get it: learning from others or in the school of hard knocks, stumbling around, making mistakes, and getting scars on your back.

The former is, of course, what any sensible person strive for. But who's really willing to share their experiences honestly, warts and all? A few folks, but not many. I try to be the rare exception, modeling myself after Buffett and Munger who, refreshingly, love to engage in self-flagellation. It's one of the main reasons I've been to the last 20 Berkshire meetings. They have so much wisdom and are wonderful in sharing it – I'm still trying to soak it all up, even decades later.

In fact, I'm in the process of writing a book about the non-investing life lessons I've learned from them over the years, which have made such a difference in my life. For example, one of the simplest yet most powerful things I've ever heard is when Charlie Munger, maybe 15 years ago at a Wesco meeting, said, "All I want to know is where I'm going to die so I never go there." After the laughter subsided, he continued, "I'm serious. Once you've achieved a certain degree of success, your main goal should be not to screw it up." (And he loves to talk about the most common ways people do so: acting unethically and losing your reputation, becoming addicted to drugs or alcohol, etc.)

His wisdom inspirited my slide presentation, The Five Calamities That Can Destroy Your Life – and How to Avoid Them, which will be a key part of my book and which I've posted at: www.tilsonfunds.com/Tilsoncalamities.pdf. My favorite slide is #24 on the 12 questions to ask yourself when considering whether to marry someone – there are few calamities greater than marrying the wrong person.

In summary, I've found that the best learning comes from people with a lot of experience who've achieved both great success and suffered great setbacks. That's me – and I'm having a lot of fun teaching everything I've learned!

I hope to see you at one of my upcoming events and that you choose to remain on my email list. Again, to do so simply click here (investors-subscribe@mailer.kasecapital.com) and send a blank email.

Best regards,

Whitney Tilson