Whitney Tilson was up 3.5% in July, surprisingly not beating the market's 7% rip, even with his well publicized BP position (cost basis of $29). Tilson's notable movers: "On the long side, winners of note included BP (up 33.2%), Goldman Sachs (14.9%), Resource America (13.0%), American Express (12.4%), AB InBev (10.5%), CIT (7.4%), and General Growth Properties (5.0%), slightly offset by Berkshire Hathaway (-2.5%). On the short side, we profited handsomely from VistaPrint (-30.4%) and Gentiva Health Services (-23.6%), but these gains were more than offset by losses on MBIA (up 54.7%) and InterOil (35.1%)." Additionally, Tilson shares an in depth thesis of his three favorite stocks: AB InBev, Microsoft and BP.
Tilson discusses his positioning for the future as follows:
In general, we believe that in the aftermath of the bursting of the biggest asset bubble in history, we are in uncharted waters and there is a very wide range of possible outcomes over the next 2-7 years. Broadly speaking, they fall into three scenarios:
1) A V-shaped economic recovery with strong GDP growth (3-5%), a falling unemployment rate, and reduced government deficits. Under this scenario, the stock market would likely compound at 7-10%.
2) A “muddle-through” economy with weak GDP growth (1-2%), unemployment remaining high (7-9%), and continued government deficits. Under this scenario, the stock market would likely compound at 2-5%.
3) A double- (and triple-, and quadruple-) dip recession where periods of growth are followed by periods of contraction, with no overall GDP growth, unemployment around 10% (with the actual level higher due to people giving up looking for work), and large deficits as the government tries to stimulate the economy (but with little impact). Under this scenario, which looks like what Japan has gone through for more than two decades, the stock market would be flat to down.
Both as investors and as Americans, we’re of course hoping for 1), but fear that this is the least likely of these scenarios. A few months ago, we would have guessed (and it’s no more than an educated guess) that the odds were 25%, 50% and 25%, respectively, but in light of recent weak economic indicators, the odds have shifted unfavorably. Hence, we are positioning our portfolio more conservatively, trimming some of our longs, adding to our short book, and increasingly shifting our long portfolio into big-cap, strong-balance-sheet, dominant-market-position blue chips like Berkshire Hathaway, AB InBev and Microsoft, as well as short-duration, special situation investments like BP and Liberty Acquisition Corp. warrants.
Full letter and Tilson's VIS presentation. We won't summarize it: that's how confident we are in our readers' basic reading comprehension skills.