Whitney Tilson was on CNBC this morning commenting on where to find value as a value investor.
He called the current situation “crazy”, in which investors chase the meek yield of treasury bonds and dump big cap blue-chip equity positions that yield more.
He said the single biggest mistake investors make is they tend to look at the rear mirror instead of the windshield.
In his base scenario, he allows the economy to be weak. But no matter in inflation or deflation environment, one wants to own strong businesses that have pricing power, he argued.
The valuation and competitiveness considerations lead Tilson to the same conclusion that several Investment Gurus in the site have advocated recently, and that is the big cap blue-chips equity positions represent good investment value.
He discussed several examples:
Johnson & Johnson (JNJ, Financial): “Fabulous company” with strong balance sheet. The company recently issued debt recently at rates a couple of basis points above the Treasury bond of the same maturity. Yet the company’s dividend yield is higher than the bond rate.
Microsoft (MSFT, Financial): Company’s trailing P/E ratio is 9.3 ex-cash. In recent quarter, company grew top line by 22% and EPS 50%. Related, Tilson also has a small position in Intel, which he said will benefit from a new PC upgrade cycle. But he does not like the recent acquisition deals Intel just announced.
Berkshire Hathaway (BRK.A, Financial) (BRK.B, Financial): A collection of strong competitive businesses. Best balance sheet managed by the best asset allocator (Chairman and CEO Warren Buffett). Tilson estimated conservatively the B-Class shares of Berkshire Hathaway’s intrinsic value at $100.
Watch the interview:
He called the current situation “crazy”, in which investors chase the meek yield of treasury bonds and dump big cap blue-chip equity positions that yield more.
He said the single biggest mistake investors make is they tend to look at the rear mirror instead of the windshield.
In his base scenario, he allows the economy to be weak. But no matter in inflation or deflation environment, one wants to own strong businesses that have pricing power, he argued.
The valuation and competitiveness considerations lead Tilson to the same conclusion that several Investment Gurus in the site have advocated recently, and that is the big cap blue-chips equity positions represent good investment value.
He discussed several examples:
Johnson & Johnson (JNJ, Financial): “Fabulous company” with strong balance sheet. The company recently issued debt recently at rates a couple of basis points above the Treasury bond of the same maturity. Yet the company’s dividend yield is higher than the bond rate.
Microsoft (MSFT, Financial): Company’s trailing P/E ratio is 9.3 ex-cash. In recent quarter, company grew top line by 22% and EPS 50%. Related, Tilson also has a small position in Intel, which he said will benefit from a new PC upgrade cycle. But he does not like the recent acquisition deals Intel just announced.
Berkshire Hathaway (BRK.A, Financial) (BRK.B, Financial): A collection of strong competitive businesses. Best balance sheet managed by the best asset allocator (Chairman and CEO Warren Buffett). Tilson estimated conservatively the B-Class shares of Berkshire Hathaway’s intrinsic value at $100.
Watch the interview:
