In what is rapidly becoming a mockery of the investing process, after Netflix recently advised shorts to cover during their investor call, the firm's desperation has hit a new all time low. Today NFLX CEO, Reed Hasting, has responded directly to ongoing attacks by Whitney Tilson that his company is due for a major correction, by posting in financial website Seeking Alpha. Hastings' stunning conclusion: " Whitney lays out a series of potential issues for us: Our CFO’s
recent resignation; threats to the First Sale doctrine for DVDs;
Internet bandwidth costs potentially increasing; declining FCF
conversion; market saturation; weak streaming content; paying more for
streaming content; and increased competition hurting margins. He only
has to be right on one or two of these issues in 2011 for him to make
money on his short of Netflix. Odds are he is wrong on all of them, in my view. Let’s take them one at a time." And while Tilson has indeed suffered major losses so far on this short, we are very confident that his perseverance will pay off. As we noted previously, the major concern facing Netflix is not so much margins (which is a major concern), but cash flow generation. As such, we continue to view the probability of a follow on offering by the company to be very high, as the firm already issued high yield bonds recently and has very little dry powder left under the "indebtedness incurrence" basket. In the meantime, we can all enjoy the spectacle that is NFLX' defense of its ludicrous 100x+ fwd P/E position.
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.
There are some, like Pimco and Whitney Tilson's T2, who enjoy talking their book, and demonstrating they just love to live dangerously by buying the stock of a company which has an Upside/Downside ratio of 1 (or 100% on both sides, with the government dead set on pushing the "equation" solidly to the D side). Then, there are those, who would rather go to Vegas, breathe in deeply some beta radiation courtesy of the Us DoD and DoE, play some serious blackjack, get the presidential suite and all the Grey Goose comped, and have the very same wining odds as a BP investment, even as the house is gamed to win in the long run (thank you HFT).For those in the first camp, below, courtesy of My Investing Notebook, is Whitney Tilson's case on why BP's stock price belongs tens of dollars higher. For the sake of Blackrock and every pensioner in the UK, we hope Tilson is correct. For now, he has a ways to get above hist cost basis.
Whitney Tilson's T2 rose 4.6% in March, and 10.1% in Q1, primarily due to its GGP holdings. Also, Iridium appears to still be in business and generating returns for T2. Other longs include such non-blue chips as Borders, Winn-Dixie, Resource America and Yahoo. The fund's short book seems to not have done so well, with key names Lululemon, DineEquity and MBIA surging during the period. The one bright spot on the short side was Palm.
Whitney Tilson is still extremely bullish on GGP. Whether he is right, or if the stock was simply floating, suspended by a rising beta tide since the beginning of the rally, will soon be determined. Even sooner if the current incipient correction accelerates. And soonest if it turns out Almunia was just buying banks time to offload their GGB holdings and Greece defaults over the next several weeks.
Whitney Tilson continues investigating High Frequency Trading
"Lots of feedback on the high frequency trading issue"
T2's Whitney Tilson on Themis Trading and Zero Hedge
An Overview Of The Housing Crisis And Why There Is More Pain To Come
Particularly notable are slides 63 and 64 for all who care to see beyond the propaganda.