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Why Bill Ackman and I Are Buying Into General Growth Properties

February 23, 2009 | About:
Todd Sullivan

Todd Sullivan

22 followers
I am buying shares of General Growth Properties (GGP) today as I feel there is deep value in them.

Where is the value?

General Growth is a U.S. based, publicly traded Real Estate Investment Trust. The Company currently has an ownership interest in or management responsibility for a portfolio of more than 200 regional shopping malls in 44 states, as well as ownership in master planned community developments and commercial office buildings. The Company portfolio totals approximately 200 million square feet of retail space and includes over 24,000 retail stores nationwide. The Company is listed on the New York Stock Exchange under the symbol “GGP”. For more information, visit the Company Web site at www.ggp.com.

GGP carries it's real state holding at cost and according to its 2007 annual report, the total is $28 billion. If we take the 200 million sq. feet of retail space they have, the cost basis is $140 a sq. foot.

Now, let's look at the MIT Transaction based cost index for the 2008 year. This matters because it takes into account what sold for what, not an estimated value.

Retail Current Cost



Using the $195 a sq. foot price from MIT, we get a real estate value for GGP of $39 billion. GGP has a current market cap of $115 million meaning it sells for .3% of its real estate value, that is point 3% not 3%. With $27 billion of debt outstanding and due in 4 years, if we subtract that from the current property value there is still $12 billion or $36 a share of value left in the properties (based on 331 million shares outstanding as of last 8K). Now, of course the actual amount will vary depending on what properties are sold where but we have a good indication by using national numbers because GGP does have holdings nationally.

To further boost a valuation, we can look at the age of the properties. Starting on F-61 of the above linked annual report we see that only $3 billion of the $28 billion total has been acquired since 2007. These properties one could argue were purchased at inflated prices and perhaps worth only equal too or slightly below carrying cost. The majority of the properties are 2002 and earlier giving a large boost to the "carry coast being far less than market value" theory.

Perhaps this is whyBill Ackman has taken a stake in 25% of the company.

The Loans:



On Feb. 12th GGP said:

On February 13, 2009, General Growth Properties, Inc. (the “Company”) and certain of its subsidiaries, including Oakwood Shopping Center Limited Partnership (collectively with the Company, the “Company Parties”), Citicorp North America, Inc., as a lender and as administrative agent for the other lenders party thereto, and certain additional lenders (collectively, the “Lenders”), entered into a First Amendment to Loan Agreement (the “Amendment”) which amended the Loan Agreement dated as of January 30, 2006 by and among the Company Parties and the Lenders for the mortgage loan secured by the Company’s Oakwood Shopping Center located in Gretna Louisiana (the “Loan”). Pursuant and subject to the terms of the Amendment, the maturity date of the Loan was extended to March 16, 2009. The Loan’s original maturity date of February 9, 2009 had previously been extended pursuant to agreements between the Company Parties and the Lenders.

The Company is currently in default under certain of its loans. As previously announced, the Company has entered into forbearance agreements with certain of its lenders pursuant to which such lenders have agreed to forbear from exercising certain of their default related rights and remedies under such loans. However, the forbearance agreements related to mortgage loans secured by the Company’s Fashion Show and Palazzo shopping centers located in Las Vegas, Nevada expired on February 12, 2009. The expiration of these forbearance agreements permitted the lenders under the Company’s 2006 Credit Facility and 2008 secured portfolio facility to terminate the previously announced forbearance agreements related to these loan facilities. However, the Company has not received notice of any such termination, as required by the terms of such forbearance agreements. In addition, the Company has also been unable to enter into or extend forbearance or similar agreements for its other mature secured mortgage loans, and there can be no assurance that it will be able to do so. The Company continues to work with its lenders with respect to loans under which it is in default or may be in default in the near future.



What does it all mean. Simply, even if GGP were forced into bankruptcy, the actual value of it exceeds the debt meaning there is still large value for shareholders. At $.43 cents a share, the upside is stunning and the downside is limited to your investment, $.43 cents.

What will the lenders do? Think about it. Do the lenders really want to start writing down commercial real estate loans for one of the largest property owners in the US by forcing it into bankruptcy? No. Why? In our "mark to market" world we now live in, this would mean that debt on other strapped REIT's would then have to be "marked down" also causing more billion dollar losses for banks. Not good.

This is the reason for the various debt extensions for GGP.

Earnings come out today after being delayed for two weeks. One has to expect some news to accompany them. I am buying shares ahead of it

Disclosure ("none" means no position):Long GGP

About the author:

Todd Sullivan
Todd Sullivan's - ValuePlays: http://valueplays.blogspot.com

Rating: 2.8/5 (31 votes)

Comments

tkervin
Tkervin - 5 years ago
The $195 per sq. ft. price from MIT is a "rear view mirror" price. Try selling any real estate at 2008 prices. Look at the chart. If we revert to a more "normalized" price you are in the $90 to $110 range. This brings the value of GGP far below what it owes. Will this happen? Don't know. That is why this is a gambling bet. Might work. Might not. The down side is limited to your investment amount. Whether you pay 43 cents or 43 dollars per share is not relevant........
Wallis
Wallis - 5 years ago
There is virtually no bid for mall properties right now. Recent mall sale transaction done by Simon Prop Group was almost impossible to finance, required personal quarantees from buyers, price was very low and the transaction still may not work.

Not so sure about GGP common at all, good luck to you.
Amit Chokshi
Amit Chokshi - 5 years ago
First, has Ackman been right about any of his real estate ideas? His real estate ideas with MCD and TGT were laughable. Just cause his daddy is a real estate investor doesn't mean he is. Ackman and many other of these guys that people worship were guys that blew up when they were small and were at the right place at the right time when the last bull market started. Ackman had other real estate ideas with BGP that worked out really well. I'd suggest most people DO THEIR OWN WORK. if you wouldn't touch the stock if Ackman or anyone else was in it, then don't invest.

Secondly, these guys already defaulted and secondly the banks have marked those at a discount. The bank debt trades on secondary desks, you can call Citi's desk or Credit Suisse or anywhere and get a bid/ask that's nowhere near par. why would you risk going into bk and waiting to see what lenders got on recovery? New bankruptcy laws changed in 2005, these guys i think have jsut 6 months vs 24 months to submit a turnaround plan and if not its Chapter 7. THey also have to keep current on utilities and otehr base operating costs, in the old bk those costs accrued and would be paid out of the re-emergence. So you have 6 months for these fools to get things turnaround or you liquidate, you think the bids in that market are going to make the lenders let alone the equity holders whole?

Lastly, talk to any REAL real estate investor and most could care less about the land value relative to cap rate. The cap rate on GGP's malls is what matters. Same thing with SHLD which is why it is going further and further down confounding value investors who prob never spent 10 min talking to commercial real estate investors.

I could understand going for a stock like TSO when it was at $9 or so because you could put liquidation values on the current asset base, net out all liabilities and be left with the refineries where you could legitimately say ok, these refineries are worth well more than depreciated value and even if not, you had a legit $11 in liquid book value...but to buy a stock that's already defaulted, i mean, why? that's gambling.

kfh227
Kfh227 premium member - 5 years ago
I'd be afraid of REITS till the bubble is definitely done popping.
gmorillo
Gmorillo - 5 years ago
Todd...

I too am a big fan of Mr. Ackman and his fund, which is why I spent such a long time analyzing the investment case for the equity of GGP as well as the rouse bonds.

With all due respect, I feel your analysis oversimplifies just how complex of a situation this is in order to make a bet on the equity. You should spend some more time analyzing the credit side of the company and what could potentially happen in a bankruptcy, especially the dynamics between the holders of the bank debt vis-a-vis the holders of the rouse bonds. The more time I spent with other (very smart) distress analysts, the more I realized how difficult it is to have conviction in any value for the equity. You should also ask yourself what are all the assumptions must you make for the equity to be in the money assuming a bankruptcy is inevitable. A mall in this environment is only worth the cash flow each property throws off, the appropriate cap rate per property and, most importantly, what buyer appetite is out there. Suffice it to say, the equity is not as attractive of an investment, in my opinion, as the rouse bonds (which is why I own them).
Sivaram
Sivaram - 5 years ago
I hate to jump on the bear party that is being set up but let me inject my opinion on two huge flaws in the reasoning. My cricism isn't aboug GCP per se (I don't know anything about it and don't have a strong opinion either way) but is about flaw in investing thinking that could apply to any investment.

TODD SULIVAN: "At $.43 cents a share, the upside is stunning and the downside is limited to your investment, $.43 cents. "

TKervin, above, points out the mistake being made with the above thinking. It doesn't matter how much something is trading for. A 100% loss is a total wipeout whether it's a penny stock or not. If you invest $10,000 in a $0.43 stock and lose it all, it's the same as if you invested $10,000 in a $100 stock and lost it all.


TODD SULLIVAN: "What will the lenders do? Think about it. Do the lenders really want to start writing down commercial real estate loans for one of the largest property owners in the US by forcing it into bankruptcy? No. Why? In our "mark to market" world we now live in, this would mean that debt on other strapped REIT's would then have to be "marked down" also causing more billion dollar losses for banks."

I'm neither an economist nor an investment expert but my impression is that, in the real world, everyone acts in their own interest. A bank that owns defaulted loans is pretty much going to act in its own interests. They are not going to sit back and think about systematic impacts, some of which may hurt competitors.

In fact, I would argue that the closer a market is to a true free market, the more likely it is for a no-holds-barred selfish action to happen.

Finally, if your financial life is under threat, which is certainly the case with some creditors right now, everyone will sell anything and everything in order to survive. No one is going to sit back and think about the mark-to-market impacts on them or their competitors.
frankiwa
Frankiwa - 5 years ago
<<<>>>

Your above statement would imply that there is still large value for the Debtholders.


<<<>>>

I thought about it. If i were a debtholder and there were that much value in the underlying real assets, then i would want to do a Chapter 11 bankruptcy to obtain the real estate. (think lampert and whitman with Kmart bonds)

If not an outright Chapter 11, perhaps a significant debt for equity swap (enough to make a difference in interest coverage) which would dilute the common holders of the units, yet debtholders would be well rewarded.
traderashish
Traderashish - 5 years ago
really good points Sivaram,

The fallacy here you and tkervin pointed out is a very common rookie mistake. Todd Sulivan is obviously starting out in investment world. I also used to think this way too when I started out. It is good to revisit this point in this market for even experienced investors where C is $2 and BAC is around $4, but potential for 100% loss is very likely and that is why these are so cheap in first place.


<<<<<

TODD SULIVAN: "At $.43 cents a share, the upside is stunning and the downside is limited to your investment, $.43 cents. "

TKervin, above, points out the mistake being made with the above thinking. It doesn't matter how much something is trading for. A 100% loss is a total wipeout whether it's a penny stock or not. If you invest $10,000 in a $0.43 stock and lose it all, it's the same as if you invested $10,000 in a $100 stock and lost it all.

>>>>


BlueHorseShoe82
BlueHorseShoe82 - 5 years ago
Ok, you guys agree way too much...I'll throw a wrench into the current trend of comments. Of course, I say the following with appreciation for different schools of thought that have already been shared, and it IS to be taken lightly:

As for Tkervin's comment about "normalized" prices, why should we give any more merit to the price/sq. ft. of real estate in 1994-1998 than to the 2008 price? Wouldn't it make more rational sense to figure out some annualized growth rate based on the more conservative 1994-1998, then apply it to 2009? I bet that would give a number closer to that $140 sq. ft. I don't think that 15 years later it is fair to value real estate at the EXACT same price/sq. ft.

Dizzy seems to be a little...dizzy (couldn't resist!) on Ackman's plan with TGT as well. How can you call the game over when we're in the 7th inning? He's given regular updates on his progress with TGT, and recently highlighted some changes with his proposal based on recommendation from TGT's board, and he anticipates progress of some sort to be made later this year. LDG and Wachovia were conveniently left out of the criticism as well....It was scary how RIGHT he was on those two, and he made quick money on both.

I don't claim to be an expert, but so far you guys haven't convinced me that Ackman has made a bad move. I'm not sure how much money you're managing or your track record, but I know more about Ackman, and I'm not going to bet against him. It is true that bankruptcy is complicated, but I'm not naive enough to think that Ackman with close to $2B under management hasn't considered all scenarios before putting his money at risk!

Wallis
Wallis - 5 years ago
Wait a minute. That Bill Ackman TGT investment is part of Pershing Square IV. That fund is down 90%! How can that not qualify as making a total, disasterous mistake?

I recall when I first heard the TV repor that he was trying to make TGT a reit, I thought it was a joke, literally, I thought they were having a joke on TV.

I don't care how smart a person is, they can make a mistake and looks like he's made a big one. GGP common doesn't look much better to me. Last I saw that balance sheet they were leveraged 26:1. It is very sad as GGP owns good stuff and was once a great company.
Amit Chokshi
Amit Chokshi - 5 years ago
sehayes - Ackman's idea with TGT was to sell off the real estate that TGT owns at a ridiculous price and use that cash to do a massive share buy back at $70. So you'd do a sale leaseback and be locked in at rental payments that you'd gross up meaning there would be off-balance sheet debt in the form of long-term leases and he'd have pissed away the $28+B he thought he could get from selling TGT RE on $70 TGT share price. Do you think that analysis worked? He also thought he'd get a great price on the credit card portfolio without realizing there are only 4 main credit card debt buyers for a portfolio of htat size (GE, JPM, HSBC, C). His entire thesis is wrong, even this AM, TGT's credit cad portfolio is LOSING money, the exact opposite of the "value" ackman thought it would bring.

It was bush league work and he paid the price for it, wll his investors did. I shorted TGT as soon as he got inand made his proposal. I've owned plenty of dogs and lost on shorting too so i'm not saying that i'm the all seer, I just knew TGT was a slamdunk short based on his analysis and I'm not a very smart guy.

Have you looked at BGP for another example of a mistake? Same thing here, he totally botched the real estate idea, first of all thinking BGP was really in control of its leases and someone like BKS would buy BGP and shut down the stores and rationalize the base. He also apparently never analyzed the impact AMZN would have long-term on this space (i think AMZN kills GME long-term too). But on the real estate, it shows the difference in people who only analyze stocks and those that have actually conducted real business. BGP was a sick sick tenant for a while. Aside from having too many bookstores around, if BKS did want BGP's space, it would make no sense to buy BGP and assume those leases. What happens in the real business world is BKS goes to the lessor like Simon Property or Kimko or Weingarden and says I know BGP is struggling, we have some interest but we want a deal on those leases. THe lessor doesnt want to have no rent coming in so would take a cut in leases (as they currently are) so you get them involved and make something happen. Maybe the lessor sells the actual underlying to BKS, that way BKS can just wait for BGP's lease to kick out and not renew with them. Much cheaper than to buy BGP and assume all these leases and other debt when you have stoes with poor cash flow. Ackman hasn't been a businessman so that thought prob never crossed his mind. He though it made sense for BKS to assume $700MM at the time of BGP debt/leases.

You know a lot about Ackman but did you know his first fund Gotham Partners imploded and if it wasn't for Leucadia putting $50MM into Pershing to seed him early on in the last bull market he wouldn't be a master of the universe. Look, Ackman is much smarter than we are, or better said he has the resources available to him where he can do a lot of work but he still has flamed out spectacularly on some ideas. The point is when you deal with industries where chance is a big factor, your perceptions get skewed. Read Fooled by Randomness, Taleb has some great points, basically the std deviation for say a cardiologist is pretty tight because it's skill based, you don't have one guy that kills everyone he operates on and anotehr that saves everyone so because skill is the main success deteriminant, the income levels are generally within a tighter band.

But for any financial person it's super wide because of how much random factors contribute relative to skill. Look at Pabrai, take away 1 or 2 years when he was small, drill down into how many winners he had or the returns that 1 or 2 winners contributed to his entire performance and it's like, wow, if it wasnt for FRO or a few other plays early on that fueled this high avg annualized performance, why would i buy his books and listen to him. and now he's more than reverted to the mean and unlikely to be able to parlay the heads i win tails i dont lose mantra around all that much. The smae thing with Ackman, very concentrated portfolio at the start of a bull market that made people think he's a genius. Then those same people pile into his TGT fund and lose 90%.

We'll see the same thing happen in 2010 probably, some kid running $10MM or so will have 4-5 positions and by 2013 will be at the value investor congress with people all waiting for him to opine on some investment idea.
Sivaram
Sivaram - 5 years ago
Ackman's Target bet probably isn't bad. It's just that he uses derivatives and all those options expiring worthless will cause massive losses. I think if he stuck with common shares, Target should outperform the market. Just a guess on my part...
Amit Chokshi
Amit Chokshi - 5 years ago
That goes to Ackman scamming his moron investors and investors beign stupid enough to think that investing in a ONE portfolio idea makes sense. As I've said before, it's not always our highest conviction idea that generates the greatest return. Even if Ackman bought stock, he'd be done. He'd have paid $70 for shares in TGT, now at $25 or so, he'd need a 200% return to get even basically. microcaps and small caps can do that and more in a short amountof time but TGT doing that in a nasty recession, credit card portfolio that will be a major drag, and also, here was a side part of my short thesis with TGT - but TGT sells Mossimo and all those licensed and TGT/private label stuff which was cheap chic. But over the past 24 months, branded labels cut prices down a ton. So if you paid say $30 for TGT jeans but now you can get Lucky Brand for $50 instead of $80 and american eagle jeans or banana republic or gap or any other branded apparel co jeans forthe same price, those dollars would move from TGT to the cheaperbut branded items. TGT's clothes are expenisve in this environment relative to branded retailers and i felt that many mall players brining prices down would hurt TGT way more than anyone was thinking.

TGT will have strategic problems soon enough. The credit card issues will be more painful but then if we're in an environment where everyone in the mid/low apparel level competes on price, they're in trouble. They're trading at 13x 2009 earnings which could be at risk meaning you're paying 16-18x 2009earnings? not sure i want to get in on that just yet.

batbeer2
Batbeer2 premium member - 5 years ago
>> That fund is down 90%! How can that not qualify as making a total, disasterous mistake?

So at what point does an investment become a mistake ?

10% down

20% ?

50% ?

Or is it a matter of time. 30% down after one year is a mistake; 15% in a week is just volatility ?

Is it some index dropped twice that much ?

In my view a 90% drop is not enough information for a stock pick to qualify as a mistake. Most will not share this view. I think most will agree that it would be helpfull to provide an alternative analysis that more nearly indicates the true (intrinsic) value of a company before calling any investment a mistake.

Ackman may have more resources, but we have the benefit of hindsight. That evens out the odds I should think.
gembree
Gembree - 5 years ago
batbeer2 Wrote:

-------------------------------------------------------

> So at what point does an investment become a mistake ?

When your ability to earn a reasonable long-term return becomes permanently impaired. If he had just bought stock, I doubt everyone would be lining up to take shots at him (probably still to take shots at the people who paid 2/20 to invest in one stock though). When TGT rebounded to $70, so would have his investment. But PS4 is not going to gain 900% if TGT hits $70 tomorrow. When you use derivatives and subject yourself to a time limit, you are accepting the possibility that your stock pick will be right but your investment will be bad, which I think is the case with Target.
svoleti7
Svoleti7 premium member - 5 years ago
On Charlie Rose, Ackman said he "doesn't use leverage" or "hang out with guys who use leverage".

If options aren't leverage, then what else? Seems to me that an option is a leveraged bet where your interest cost is added up front and where the entire contract expires on a certain date.
sami
Sami - 5 years ago
There are three scenarios for GGP:

1. restructure debt and the stock is off to the races,

2. bankruptcy protection but you can rule out this possibility as there is no DIP financing for anyone let alone commercial real estate

3. liquidation: here the common equity will not see any value because the index you allude to is misleading as there was no transactions of note occurring for over a year now in commercial real estate, the market is dead so I am not sure what does the index measure. and second their asset values have come down significantly to cover their debt. NOI is down by 10% this year and will go down further as vacancies increase and more importantly cap rates are moving up; you have two side of the valuation metric moving against you.

I do not think as you suggest that in liquidation you will get any thing back. And to illustrate my point why did not the banks foreclose on the properties if there is value in GGP? you have to look at owners of debt and what they are doing. They need the capital and not thrilled to extend CRE debt maturities. The reason they did not foreclose is they will get pennies on the dollar

I think Ackman and other are betting on scenario 1 and that is a speculative call and not good risk/ reward ratio.

SCthought
SCthought - 5 years ago
Todd Sullivan should be banned from writing any articles on equities held by Bill Ackman. Todd Sullivan is bias and writes promotional articles on whatever securities Ackman is buying.

He was all about Borders this summer when it was above $7 now at $.55 and ever since the first 13K released that Ackman was buying GGP Sullivan has published promotional articles.

Todd appears to be an smart guy but the promotion of Ackman (who is one of my favorites) is really starting to hurt his credibility.

For GGP he has really oversimplified the situation with nothing material stated concerning an analysis of what will happen to common shares following a bankruptcy. He also makes no mention of the debt covenant of 1.6x Interest coverage which makes or break the situation.

Just my 2 cent.
Sivaram
Sivaram - 5 years ago
DIZZY: "He'd have paid $70 for shares in TGT, now at $25 or so, he'd need a 200% return to get even basically. microcaps and small caps can do that and more in a short amountof time but TGT doing that in a nasty recession, credit card portfolio that will be a major drag, and also, here was a side part of my short thesis with TGT - but TGT sells Mossimo and all those licensed and TGT/private label stuff which was cheap chic."

In the short run, what you are saying absolutely true (maybe you are only talking about that given Ackman's use of options, which have duration.) But in the long run, there is nothing to say a mid-cap or large-cap cannot rebound 200% or 300%. It seems like a very large move but we are facing a severe sell-off and some are likely to overshoot. A lot of stocks rebounced several hundread percent from their 1974 bottom or the 1933 bottom--yes, we are facing a 50-year bottom like 74 or 33. Let's not forget that Buffett bought Washington Post in 1974 and it dropped around 66% from peak (I posted this chart about it on my blog a while ago.) Buffett didn't buy at the top but, nevertheless, it dropped something like 50% and then rebounded several hundread percent. I'm not saying saying Target is the same as WaPo at that time but the point is that some of these are being irrationally sold off.

Dizzy: "But over the past 24 months, branded labels cut prices down a ton. So if you paid say $30 for TGT jeans but now you can get Lucky Brand for $50 instead of $80 and american eagle jeans or banana republic or gap or any other branded apparel co jeans forthe same price, those dollars would move from TGT to the cheaperbut branded items. TGT's clothes are expenisve in this environment relative to branded retailers and i felt that many mall players brining prices down would hurt TGT way more than anyone was thinking."

I don't know much about Target (don't follow it and it's not in Canada where I am) but what you are saying is more of a concern in the short term than anything. A lot of those higher priced brands will discount but it's likely unsustainable for them. Maybe they can mark down excess inventory or a few things here and there. I doubt they can keep doing that for a long time since their business is not built on that. Furthermore, marking down has permanent negative effects on higher priced goods since it weakens their positioning and brand value. In contrast, the lower end retailers (Wal-mart, Target, Costco, Kmart, etc) are built on lower priced products and they can ride out the storm with lower priced products, especially if some higher priced retailers go bust or something.
BlueHorseShoe82
BlueHorseShoe82 - 5 years ago
In terms of both GGP and TGT, I agree that the important distinction of being a good investment or not depends on agreeing on a time horizon. That was the point in my earlier post when I said that you can't call the game in the 7th inning. You can say that Ackman has "lost" his bet until the day(s) that the shares rally because of some conclusion to the events that Ackman is pushing for in TGT/GGP. Then all of the unrealized losses from the past months/years don't matter at all. The risk is that the ULTIMATE conclusion with TGT (which hasn't been reached) and GGP (bankruptcy, recovery, etc.) will be negative, obviously. We can all just speculate for now, but some time from now somebody will be right. I've enjoyed the different ideas on the debt of GGP and the view from the debtholders' perspective of GGP's prospects. Good food for thought!
fxtrader
Fxtrader - 5 years ago
@sehayes1982:

ackman himself stated very clearly that if tgt was trading unchanged a year from now, then the fund would be dead. so he obviously used lots of leverage and it seems it was quite an amount of long call positons. for otherwise, there is no way his fund would be down a year from now when tgt didn't move an iota.

of course, ackman has other funds that do better, but seriously: how much credibility can you give a gambler, a speculator? In fact, the guy has nothing that would make him a guru. here he is named along with buffet, watsa, berkowitz, cummings... - but he couldn't be farther away from them when it comes to investing skills.

grahams clear distinction between speculating and investing holds true today as it hhelkd true 40 years ago.
cm1750
Cm1750 premium member - 5 years ago
Ackman was right about the credit market and overleverage of I-banks (shorted LEH etc.) but I'm not sure why he thought a credit implosion would not hurt retail - Tilson the fraud had the same view (probably got from Ackman).

Ackman overpaid for TGT at $70 when everything was going great. I myself own TGT currently at an avg cost of $31 (sold covered calls to reduce cost) as I think it should reach $40-45+ when the economy comes around, which may take a while.

In addition to the poor REIT/share buyback analysis mentioned already, Ackman is a fool for buying options - basically he is making a leveraged call on when the economy comes back - if the recession lasts through 2010/2011, Ackman's options are toast. I'm not sure why Ackman thinks he is an economist - this is not investing, it is gambling. Even WEB does not try to predict the economy.

Amit Chokshi
Amit Chokshi - 5 years ago
Tilson talks like he was ahead of the housing and financial crisis but all you need to do is look up his recommendation for buying Mueller Water Products at $15. He also suggested looking into Corus in the $20s when he was on bloomberg tv.

The one thing I wish Kiplinger would do is hold this guy to the fire, he gets to have this publicity thing where he talks up his book and i can't remember when he had a winning idea. he recommended MWA, WU, I cant recall all of them but it's disaster alley.
cm1750
Cm1750 premium member - 5 years ago
Tilson is a joke and his fund (TILFX) is in the bottom 10% for the past 3 years according to Morningstar. Based on his holdings, he just steals from Ackman and others and tries to lure suckers into his fund by doing as many interviews as he can.
Amit Chokshi
Amit Chokshi - 5 years ago
Tilson is the next Warren Buffett and a disciplined value investor that saw the mortgage crisis coming and positioned his clients for it.
Amit Chokshi
Amit Chokshi - 5 years ago
Some of Tilson's hits include: DLIA at $2.50 which is now at $1.65, he said you're getting the core business for free, whatever. TA, who knows what he recommended it at but it's under a bean; REXI he has been pumping since the 2007 VIC if not earlier, said it was worth $20+,this was the guy that is trying to market himself as the seer of the financial crisis pumping a long in a financial and REXI is at $2. BGP was pumped in the teens if not higher, it's heading for bankruptcy. Mueller Water at $15+, it's at $2. DPS (i'm short for disclosure) in the $20s, now at $14 and IMHO going lower in the next year.

APL, XTXI all like for 4-6x their current values. Also suggested AXP in the $20s since you can get one of the worlds best businesses for 10x earnings and because it was at 11 year lows. He also had Celebrate Express (BDAY) as a top holding for his mutual fund heading into 2007 around $14, it got bought out for $4. Just go look him up on FT and Kiplinger and his website, it's really a lot of fun if you're bored to read his stuff and then check where the prices are. Hopefully he sends Ackman and Einhorn checks for the ideas they send his way since his own ideas are not just like 30-40% dings, thye basically are zeros.


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