market folly

At day two of the Value Investing Congress, Whitney Tilson & Glenn Tongue of hedge fund T2 Partners gave the case for going long Berkshire Hathaway (BRK.A) and J.C. Penney (JCP) in a presentation entitled "Many Ways to Win."

Be sure to check out all our notes from the Value Investing Congress.


Whitney Tilson & Glenn Tongue (T2 Partners)

Embedded below is their full slideshow presentation:




The hedge fund pitched J.C. Penney (JCP) and they have a $71 price target (stock $31 now). “Decent” business. Followed Ackman, but got a lot more interested with new CEO on board. Story well known, same as Bill Ackman’s JCP thesis a few months ago. Persistent question about how the real estate value can be realized.

Other new stocks they have added in size: Goldman Sachs (GS), Citigroup (C), and Sandisk (SNDK). GS, C: Ackman also has these positions. Says trading at discount to book value. Says everyone ignores a fabulous business at C’s “good bank” and only looks at the bad bank portion.

SNDK: they own disk drive makers, says 90% storage on spin platters, the other 10% will be in Flash memory. Memory capacity constrained, explosive demand via tablets, smartphones. NAND has historically been commodity product, but being spec’d into a smartphone is different, enormous operating leverage, SNDK has IP on MLC.

You must overcome your initial knee-jerk reaction that “this is a terrible business.” The industry has changed- consolidated, and demand is exploding. Every iPad, iPhone needs it, yet analysts all expect pricing to fall as technology falls. They think pricing will improve. SNDK is trading so cheap, at a 6x P/E, and it could grow and trade at 20x P/E. Says a massive portion of the margin in iPhones is the incremental NAND. SNDK in the 4S.

As indicated in our September hedge fund performance numbers post, T2 was -9.5% in September and -29.6% for the year at that time.


Don't miss the rest of the hedge fund manager presentations in our notes from the Value Investing Congress.