Whitney Tilson Shareholder Letter September 2011
Our fund declined 9.5% in September vs. -7.0% for the S&P 500, -5.9% for the Dow and -6.3% for the Nasdaq. Year to date, it’s down 29.6% vs. -8.7% for the S&P 500, -3.9% for the Dow and -8.4% for the Nasdaq.
August largely repeated itself in September for us: our short book was down nearly twice the market, but these gains were far outweighed by losses across the board in our long portfolio, despite generally good company-specific news regarding our major holdings (discussed below). Amidst another tumultuous month in the markets, investors again dumped stocks that are even slightly illiquid, perceived to be risky, or valued primarily on future, rather than current, profits – traits that characterize many positions in our fund.
Our three biggest losers by far were Grupo Prisa (-32.9%), Iridium (the warrants, which comprise the bulk of our position, were down 29.0%), and Howard Hughes Corp. (-22.2%). Other losers included Goldman Sachs (-18.6%), Citigroup (-17.5%), Microsoft (-6.4%), and Berkshire Hathaway (-2.7%). You know it’s a tough month on the long side when your biggest winner is up only 0.6% (J.C. Penney).
Our short book performed well, led by declines in First Solar (-36.8%), ReachLocal (-25.3%), OpenTable (-24.6%), Boyd Gaming (-21.6%), Ethan Allen (-20.8%), ITT Educational Services (-20.2%), St. Joe (-18.7%), Philips-Van Heusen (-12.6%), Green Mountain Coffee Roasters (-11.3%), Salesforce.com (-11.2%), and Lululemon Athletica (-11.0%).
In the rest of our letter (attached), we discuss a similar period of underperformance in late 2008-early 2009, how we’re in the same boat, our economic outlook and our fund’s positioning, how we approach investment decision making today, our biggest winners and losers this year, and seven stocks: Berkshire Hathaway, Howard Hughes, Iridium, Grupo Prisa, Goldman Sachs, Citigroup and MRV Communications.
T2 Accredited Fund Ltr to Investors-Sept 11