Whitney Tilson is a contrarian value investor, making him something of an outlier in the investing world. His perspectives sometimes echo Warren Buffett’s philosophy, while other times they resemble Bill Ackman’s approach. Having managed a hedge fund and now operating an investment newsletter, Tilson brings diverse investing experience to his analysis.
In this article, we’ll examine Whitney Tilson’s stock picks and overall investing philosophy.
Who is Whitney Tilson?
Whitney Tilson previously managed hedge fund Kase Capital Management. Kase operated from 1999 until Tilson shuttered the fund in 2017, acknowledging that he had underperformed the S&P 500 for seven years and was losing money for investors. Since 2017, Tilson has candidly discussed his experience at Kase and emerged as one of the few hedge fund managers willing to address the industry’s shortcomings.
Today, Tilson operates the Value Investor Insight newsletter and chairs the Value Investing Congress, a biannual investment conference.
Whitney Tilson Investment Style
Whitney Tilson is a value investor with a contrarian edge. He frequently cites Warren Buffett and Charlie Munger as mentors, yet some of his most notable trades involve shorting companies he believed were overvalued or employed questionable business practices. Tilson maintains that beating the market requires occasionally challenging conventional investment wisdom.
Tilson’s investments typically span medium to long-term horizons, characteristic of value investors. He follows Warren Buffett’s advice that stocks not worth holding for 10 years aren’t worth owning at all. Nevertheless, Tilson has occasionally sold winning positions prematurely. For instance, he sold Netflix in 2013 after holding the stock for just 18 months, then watched the company’s shares soar following his exit.
Whitney Tilson Stock Picks
Whitney Tilson has executed several notable investments both independently and through Kase Capital Management. Let’s examine some of his most significant all-time stock picks.
Lumber Liquidators
One of Tilson’s most publicized trades was a short position against Lumber Liquidators, a Virginia-based hardwood flooring company. Tilson established his short position from 2013-2014, then appeared on CBS’s 60 Minutes in 2015 to outline his thesis. According to Tilson, Lumber Liquidators was importing formaldehyde-tainted flooring from China. While Lumber Liquidators never faced a product recall, the stock plummeted nearly 90% from its 2013 peak.
Despite being the public face of the campaign against Lumber Liquidators, Tilson’s short position was relatively modest. He ultimately generated only around $1.4 million for Kase Capital Management, which managed roughly $50 million in assets at the time.
Netflix
Another prominent Whitney Tilson stock pick was Netflix, which he purchased through Kase Capital Management in 2011. Having previously failed with a short bet against Netflix, this investment surprised many observers. However, as Tilson explained to investors, Netflix shares had plunged 75% from their peak, making the company significantly undervalued in his view.
Tilson proved correct. Netflix shares surged 5x over the following 18 months, prompting Tilson to sell and lock in profits. However, Tilson underestimated streaming’s full potential. At their late 2021 peak, Netflix shares traded at roughly 22x what Tilson received in 2013.
Berkshire Hathaway
Whitney Tilson has maintained a long-term investment in Berkshire Hathaway, both personally and through Kase Capital Management. This position remained consistent during the hedge fund’s final years, and Tilson continues advocating for Berkshire Hathaway holdings in the Value Investor Insight newsletter. In 2021, he dubbed it a “stay-rich stock.”
Since 2010, when Tilson reported that Kase Capital Management began underperforming the S&P 500, Berkshire Hathaway shares have gained 300%.
Iridium Communications
Iridium Communications represents less of a success story than a premature exit for Whitney Tilson.
Tilson began purchasing Iridium Communications stock in 2009 and expanded his position in 2013. He expressed optimism about Iridium being one of only two major satellite communications providers in the US and holding contracts with all major US military branches.
By 2015, Tilson had completely liquidated his Iridium Communications position. From 2009 to 2015, the stock remained essentially flat. However, Tilson’s timing proved premature. From 2015 to 2022, the stock gained over 540%.
Whitney Tilson’s Lifetime Performance
Whitney Tilson’s lifetime performance falls short of what his status as a hedge fund manager and investing authority might suggest. From 2010 to 2017, Tilson’s fund, Kase Capital Management, consistently underperformed the S&P 500. In 2017, the fund’s closing year, it declined 9% while the broader market gained over 18%.
Crucially, Tilson failed to capitalize fully on his best trades. His Lumber Liquidators short position remained relatively small. He also exited Netflix and Iridium Communications prematurely. While Tilson has identified several excellent stock picks, he hasn’t consistently maximized winners or minimized losers quickly enough. This timing has significantly impacted his overall performance.
Since closing Kase, Tilson has provided stock recommendations and analysis, but his personal investments remain private. Consequently, it’s unclear whether he successfully navigated the COVID-19 market volatility or last year’s technology selloff.
Conclusion: Whitney Tilson Stock Picks
Whitney Tilson is a prominent value investor who has gained attention in the investment community through his contrarian perspectives. Tilson has delivered some impressive stock picks, including his short against Lumber Liquidators and his Netflix position during the company’s explosive growth phase.
Nevertheless, Tilson’s overall performance remains mixed at best. His hedge fund closed in 2017 following several years of market underperformance.
