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Whitney Tilson: Long Berkshire Hathaway and Short Home Builders and Region Banks

January 19, 2010 | About:
guruek

guruek

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Is now the time to buy Berkshire Hathaway Class B shares on a split?

T2 Partners managing partner Whitney Tilson certainly thinks so.

In the latest CNBC interview, Tilson stated that he thinks BRK-A has an intrinsic value of around $14,000 per share and currently it is traded at a biggest discount to intrinsic value ever.

He thinks Berkshire Hathaway will be substitute Burlington Northern Santa Fe (BNI) in the S&P 500 after the merger and the Class B share split. That will be a catalyst for the stock to move up.

Elsewhere, he thinks housing trouble is not over and there will be more foreclosures coming into the market. The country does not need that many new houses in the next couple of years, hence, it makes sense to short the home builders. ITB is the iShares for home builders.

Tilson also thinks certain small regional banks may continue to struggle and that makes them ideal shorting candidates:



























Rating: 3.0/5 (9 votes)

Comments

Amit Chokshi
Amit Chokshi - 4 years ago
Tilson is just a$$ backwards as always, late to the party and can't find value except peddling his old Berkshire analysis. Seriously, any value investor that holds BRK should ask if WEB would EVER EVER EVER have owned a holding company run by another fund manager when he was running money. Can you see a young WEB EVER holding a massive proxy for the US economy when he could invest in ANYTHING else???
jonmonsea
Jonmonsea premium member - 4 years ago
Is it really a massive proxy for US economy, though? That would be the S&P, whose companies do not get 10% dividends from GE and GS with free warrants going out five years tossed in. Nor do they get huge amounts of float that has positive carry. Still, you're right: Buffett would not have bought Berkshire back then b/c he is smart enough to do better. Are we?
Amit Chokshi
Amit Chokshi - 4 years ago
Pabrai may not hold BRK in the same concentration level, he held it as a cash substitute. Berkowitz I can't argue with. However, I would ask that people look at the guys that have really stellar track records like Einhorn, Lampert, Ackman, Mandel, etc...it's a different measuring stick for some guys. Berkowitz is considered a genius cause he's averaged 13% annualized because he's a mutual fund guy. The numbers for these guys are 2-5% higher.

If you are reading this website, presumably you have enough interest to learn how to invest in stocks and bonds. You have also read WEB and Munger so should also note that they state it's temperament that trumps intellect in the stock game. So I think everyone here can do better with a stock of their own choice than BRK.

You guys that are big BRK fans should really factor in tail risk too. BRK is going to split into a $65 stock that WEB and Munger, even when B shares were first issued, said they would never own. It's going to be toilet paper now with people buying solely to attend the meeting (prob the same why they bought the stock in the $3k-5k price).

BRK going from $100 to $140k according to Tilson. That's been roughly the SAME estimate he's had since the VIC in 2007. You don't think there are other stocks that are trading at far greater discounts to IV than BRK??
dealraker
Dealraker - 4 years ago
From Alice Schroeder to the little names that pop up on these comments I simply find it fun to see all the Buffett envy that creeps up from between the cracks. "EVER EVER EVER have owned a holding company..."

Dear Dizzy Berkshire right now, and I mean right now, owns a holding company. Do some reasearch and you'll find out what company that is.

I think you've got stock prices mixed up with business performance.
Amit Chokshi
Amit Chokshi - 4 years ago
Dealraker - I've stated plenty of times on this site that WEB is the best and I know plenty about valuing a business. That's why I state what I do. People that manage small amounts whether its personally or professionally like Whitney that model themselves after WEB have no business buying BRK at these prices. I thought the goal is to buy dollars for 50 cents or less.

Plus, factor in fat tail risk. The one thing I asked a client of mine who was adamant on holding BRK is why would you hold that at this point? The bigger it gets in terms of size of business, the lower the future returns not to mention you won't know what the WEB premium is until WEB kicks it and why stick around for that. I know we all like to focus on business-only risk but WEB is BRK and none of us are billionaires so why sustain a likely big loss in the event WEB is not running the ship.

Secondly, it comes back to all of the people here that try to model themselves like WEB. Would you see WEB ever buying a holdign co run by another investment mgr, particularly when that holding co was so massive there was likely to be very little inefficiency in the valuation? If you have $100k to invest, you're telling me BRK would rank in your top 20 ideas at this point/valuation?
batbeer2
Batbeer2 premium member - 4 years ago


Would you see WEB ever buying a holdign co run by another investment mgr, particularly when that holding co was so massive there was likely to be very little inefficiency in the valuation?Ehm...... WEB invests along with Leucadia where Leucadia is the controlling entity. If memory serves he did so as recently as July. The holding company was named Berkadia III or something similar.
Amit Chokshi
Amit Chokshi - 4 years ago
bat - I know that, but it's really a partnership type of agreement. Luec and BRK combine for their own special entity, that's fine. I am talking specifically about WEB wannabes allocating a portion of their capital to a $160B market cap co that is unlikely ot have a high degree of price inefficiency and more so has tail risk with WEB's life expectancy (will find out what the WEB prem really is worth) when there are probably hundreds of better ideas out there. Esp when many people own the B shares and Warren himself has said he'd never recommend buying them!
madbulk
Madbulk - 4 years ago
I don't understand that comment at all. It's not a proxy of anything. The proxy went up 25 percent last year. BRK sat still. And BRK like anything else is subject to the ups and downs of short term expectations and this creates opportunity for any value investor, hedge fund manager or otherwise.

Whether Whitney is right or wrong, you can take a side of course.

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