Whitney Tilson

The most popular talking-head on financial TV (after Bill Miller and Byron Wien), Whitney Tilson, has not had a #winning year so far. In fact the simple pair trade Anti-Tilson (Long GMCR-Short Netflix which we closed when it returned 50% in just over a month), that was so popular last year, has been expanded to include his biggest shorts (as we promised yesterday). While we do not know weightings (obviously), on an equal-weighted basis from today's price, Tilson's 10 largest shorts have managed an impressive 7.37% gain on the year, handily outperforming his 15 largest longs which have managed a sub-market performance gain year-to-date of 1.45%. So being long Whitney's shorts and short the-ever-smiling manager's longs (on an equal weighted basis) would have made you around 6% year-to-date - considerably better than the +2.5% move in the S&P itself.

Grab a cup of coffee, find a comfortable chair, lean back, and prepare to be entertained: here is Whitney Tilson's Mea Culpa for "returning" -24.9% in 2011.

When at first you cover a soaring knife near its all time high, try, try again to catch it on the way down. And if you are Whitney Tilson, this is precisely what you do. The fund which is now down 25% YTD has lost 21.4% on its second round Netflix investment, something which Zero Hedge readers were on the other side of for the entire 50% pick in one month. But heaven forbid you learn a lesson: "A couple of weeks ago we sent you an article we published entitled “Why We’re Long Netflix and Short Green Mountain Coffee Roasters,” which is attached in Appendix B. Since then, both stocks have moved against us, making them even more attractive in our opinion." Lordy...

No circuit breaker was triggered as yet another unborn political career was dumped on the trash heap of history. And this even without a Muddy Water Strong Sell report, or Whitney Tilson going activist Cain nomination odds.

While being caught short stocks in the face of the global Bernanke Put, or long Chinese IPOs this year, it seems relative-value trades remain preferential from a risk-reward perspective. That is of course unless you are our old friend Whitney Tilson. The Anti-Tilson ETF (Long GMCR / Short NFLX) is up 8% today and stands at an impressive +43% (lifetime highs) in the 20 days since we recommended it. NFLX weakness this morning attributed to Wedbush's 30% downside target downgrade.

Because every market has two side: one which makes money... and Whitney Tilson. The anti-Tilson ETF (long GMCR, short NFLX) is now 40% since inception less than two weeks ago, and 3+% today alone. We don't see the levitation halting any time soon. We don't see the pain for T2 LPs moderating much either.

Our favorite trade since Friday, November 11, when Whitney Tilson went public with his short GMCR, Long NFLX theses, namely to do the opposite and Buy GMCR and Sell NFLX has now returned 40% in 6 days. And we don't even collect 2 and 20, nor do we organize hedge fund hotel symposia.

When we discussed the slow motion trainwreck that is the implosion of Netflix back on October 11, our only outstanding question was "when is the inevitable follow on equity offering coming?" We have the answer, and it is now. Netflix just announced in an 8-K filing that it has raised $200 million in convertible notes. The conversion price is a laughable $85.80 or just 16% above the closing price translating into 2.3 million shares of additional dilution, confirming that this is nothing short of an equity raise in sheep's clothing (on the buyer's terms at that), and indicates that the firm may have well entered a liquidity death spiral courtesy of a business model that still has to generate any substantial free cash flow. Naturally, the second investors realize this they will dump the stock in droves, which is horrendous news for Whitney Tilson, but amazing news for everyone long the Anti-Tilson ETF. In other news, it may just be time for Tilson to call it a career.

While pervasive asset liquidations are dragging everything lower, stocks and gold included, one thing is doing amazingly well and is up over 7% intraday and nearly 36% in the past 5 days. The "thing" is, naturally, the Anti-Tilson ETF: the pair trade of being long GMCR (Tilson's vocal short) and short NFLX (Tilson's legendary flip flop). Just like theStreet did an amazing job of being the contrarian indicator du jour, so Tilson continues to be the market's most valuable (counter) indicator.

The last time Whitney Tilson decided to go public (on a completely unsolicited basis) with his investment thesis of short Netflix, the market took him to the toolshed leading to Tilson (as usual) underperforming the S&P by a ridiculous amount. This time around, with his very public announcement that he is now long NFLX and GMCR... things don't seem to be much different. We have created a CIX screen which is basically an anti-Tilson ETF: long GMCR (on the inevitable squeeze) and short Netflix on the billions in off balance sheet liabilities that somehow were missing from Tilson's thesis, and the result is...

The last time Whitney Tilson presented his "investing thesis" case in public, he got promptly anihilated as was to be expected - there is a reason why real hedge funds keep their positions secret. This time, "it will be different." Incidentally, it is not a hedge fund manager's job, no matter how tiny said hedge fund is, to plea to the broad investing public: it makes one appear like a petulant child. Their job is to outperform the S&P since inception: a task T2 still seems to find daunting...

Pardon our ignorance, but shouldn't a value-focused hedge fund that has been in operation for 7 years, and has nearly daily TV and media exposure, outperform the S&P net of fees? Actually, scratch that, shouldn't any hedge fund still in existence after 7 years, outperform the S&P?

And now the "letter" we have all been waiting for...

It appears yesterday's FSLR CEO "departure" was no fluke. The company just came out with earnings which in addition to being a current quarter disaster with EPS coming in at $2.25, on expectations of $2.67, also added disastrous guidance to the mix. To wit: First Solar now sees year EPS $6.50-$7.50, compared to $9-$9.50 previously, and is now forecasting net sales of $3 billion - $3.3 billion, compared to $3.6 billion -$3.7 billion previously. And combining the worst of both the Netflix and Amazon press releases, the company has also announced it is cutting its CapEx, and is further exploring options to reallocate overhead expenses. We hope Whitney Tilson wasn't buying this one on the way down too as the company may be headed for $0.00 soon to quite soon. Of course, if his plan, like in NFLX, is to keep adding more on the way down and averaging lower, he will be more than content.

And just as we were thinking of buying some deep OTM calls...