Whitney Tilson is a contrarian value investor, making him something of an outlier in the investing world. Sometimes his views sound like echoes of Warren Buffet, while at other times they sound more like Bill Ackman. Tilson has been a hedge fund manager and now runs an investment newsletter, so he has a wide range of investing experience.
In this article, we’ll take a closer look at Whitney Tilson’s stock picks and overall investing approach.
Who is Whitney Tilson?
Whitney Tilson is the former manager of hedge fund Kase Capital Management. Kase operated from 1999 until Tilson closed down the fund in 2017, announcing that he had trailed the S&P 500 for 7 years and was losing money for investors. Since 2017, Tilson has been outspoken about his experience at Kase and has become one of the few hedge fund managers to speak about the industry’s shortcomings.
Tilson now runs the Value Investor Insight newsletter and chairs the Value Investing Congress, a bi-annual investment conference.
Whitney Tilson Investment Style
Whitney Tilson is a value investor with a contrarian twist. He has frequently praised Warren Buffett and Charlie Munger as mentors, but some of his most famous trades are shorts of companies that Tilson believed were overvalued or had poor business practices. In general, Tilson believes that the only way to beat the market is by going against prevailing investment advice sometimes.
Tilson’s investments are generally medium to long-term, which is typical for value investors. He cites Warren Buffett’s advice that if a stock isn’t worth owning for 10 years, it’s not worth owning at all. However, Tilson has also been known to sell winning positions early. For example, he sold Netflix in 2013 after holding the stock for just 18 months, only to watch the company’s stock explode upwards after his sale.
Whitney Tilson Stock Picks
Whitney Tilson has made a number of notable investments both on his own and through Kase Capital Management. Let’s take a look at some of his best all-time stock picks.
One of Tilson’s most public and well-known trades was a short position against Lumber Liquidators, a Virginia-based hardwood flooring company. Tilson built a short position against the company from 2013-2014, then went on the CBS show 60 Minutes in 2015 to explain his reasoning. According to Tilson, Lumber Liquidators was importing formaldehyde-tainted flooring from China. Lumber Liquidators ultimately never faced a product recall, but the stock nonetheless dropped nearly 90% from its 2013 high.
Although Tilson was the face of the public campaign against Lumber Liquidators, his short position was relatively small. He ultimately made only around $1.4 million for Kase Capital Management, which had roughly $50 million in assets under management at the time.
Another famous Whitney Tilson stock pick was Netflix, which he bought through Kase Capital Management in 2011. Tilson had previously opened a failed short bet against Netflix, so the investment came as something of a surprise. But as Tilson explained in a letter to investors, Netflix shares had just dropped 75% from their peak, and he believed the company was significantly undervalued.
Tilson was right. Netflix shares shot up 5x over the next 18 months, and Tilson sold to lock in profits from the trade. However, Tilson missed the full potential of streaming. At their peak in late 2021, Netflix shares were worth roughly 22x what Tilson sold them for in 2013.
Whitney Tilson is a long-time investor in Berkshire Hathaway, both on his own and through Kase Capital Management. It was one of the few positions that remained constant during the last few years of the hedge fund’s existence, and Tilson continues to sing the praises of holding Berkshire Hathway in the Value Investor Insight newsletter. In 2021, he called it a “stay-rich stock.”
Since 2010, when Tilson reported that Kase Capital Management began trailing the S&P 500, Berkshire Hathaway shares have appreciated 300%.
Iridium Communications isn’t exactly a success story for Whitney Tilson. Instead, it’s an almost-great stock pick.
Tilson began buying Iridium Communications stock in 2009 and increased his position in 2013. Tilson reported being bullish about the fact that Iridium Communications was one of only two major satellite communications providers in the US and that the company held contracts with all of the major US military branches.
By 2015, Tilson had completely sold his position in Iridium Communications. From 2009 to 2015, the stock was essentially flat. However, it appears that Tilson was just too early. From 2015 to 2022, the stock gained more than 540%.
Whitney Tilson’s Lifetime Performance
Whitney Tilson’s lifetime performance is less stellar than his position as a hedge fund manager and investing guru might suggest. From 2010 to 2017, Tilson’s fund, Kase Capital Management, trailed the S&P 500. In 2017, the year the fund closed, it was down 9% for the year even as the overall market gained more than 18%.
Importantly, Tilson didn’t capitalize on some of his best trades. His short position against Lumber Liquidators was relatively small. He also sold out of Netflix and Iridium Communications early. Although Tilson has had several excellent stock picks, he hasn’t consistently been able to double down on winners and cut losers quickly. That’s had a significant impact on his overall performance.
Since shutting down Kase, Tilson has presented stock recommendations and analysis, but none of his personal investments have been made public. So, it’s difficult to know whether he successfully navigated the market around the COVID-19 pandemic or last year’s tech crash.
Conclusion: Whitney Tilson Stock Picks
Whitney Tilson is a well-known value investor who’s made waves in the investment community with his contrarian views. Tilson has had some impressive stock picks, including a short against Lumber Liquidators and a long position in Netflix just as the company entered its phase of exponential growth.
However, Tilson’s overall performance is mixed at best. His hedge fund closed in 2017 after several years of trailing the market.