Whitney Tilson Gets Defensive

by: Market Folly

The latest investor letter out of Whitney Tilson's hedge fund T2 Partners gives us a nice in-depth look at its portfolio. In particular, we're interested to learn of some of the fund's short positions because let's face it, this kind of information is often scarce in hedge fund land.

In its letter, we see that T2 Partners has been short Herbalife (NYSE:HLF), InterOil (NYSE:IOC), Regions Financial (NYSE:RF), VistaPrint (VPRT), PMI (PMI), Radian (NYSE:RDN), MBIA (NYSE:MBI), and Palm (PALM). T2 also notes that as the market has headed higher practically all year, the fund has begun to trim its longs and expand its short book. So, those of you looking for some possible short candidates might examine those listed above to do some due diligence on. And, for more thoughts from Tilson and company, we've posted its October letter and its thoughts from the Value Investing Congress as well.

Here's a section of the November commentary from Whitney Tilson's hedge fund T2 Partners courtesy of the great folks over at MyInvestingNotebook:

We started getting greedy a year ago after Lehman’s collapse and the resulting market panic, buying ever-cheaper stocks all the way down to the market’s final capitulation in early March. Since then, during one of the biggest, fastest rallies in history (the S&P 500 rose 64.6% from March 9 through the end of November), we have steadily become less greedy and more fearful by doing three things: trimming our longs, adding to our shorts, and repositioning our long portfolio toward more defensive, big-cap stocks such as Berkshire Hathaway (NYSE:BRK.A), Microsoft (NASDAQ:MSFT) and Pfizer (NYSE:PFE).

Today, our net long position is down to approximately 20%, the lowest it has ever been, reflecting both our top-down macro concerns (outlined in our August and September letters) as well as our core bottoms-up analysis, which is uncovering many great shorts and a paucity of attractive longs. That said, we like our long positions a great deal and are still net long, so we’re certainly not perma-bears and aren’t predicting Armageddon.

So, interesting thoughts from hedge fund T2 as it clearly has upped its cautionary stance to the markets. The fact that its net long position is at the lowest it has *ever* been stuck out to us. While many fund managers have been skeptical of the monster rally continuing, Tilson has definitely joined the ranks as he believes fundamental problems still remain unsolved. To see more thoughts from hedge fund T2 Partners, you can read its October letter to investors and T2's remarks from the Value Investing Congress.

Original article