Reviewing the Tilson Fund Portfolio

by: Devon Shire

As an equity investor, a great place to look for ideas is in the portfolio holdings of other successful investors.

Whitney Tilson has become a well known value investor. Some would suggest that he is more successful in marketing himself than anything else, but the performance of his hedge fund T2 Partners has been excellent since inception.

Tilson also has a mutual fund that is available to retail investors. Its performance has not been as good as his hedge fund (which has used short selling to greatly enhance returns), but it has beaten the overall market.

For the cumulative period since the fund's inception on March 16, 2005, the Tilson Focus Fund returned an annualized 5.47% return versus a 2.88% annualized return over the same period for its benchmark (Dow Jones Wilshire 5000).

As per his end of April 2010 semi-annual report Tilson is not bullish on equities:

In our opinion, we are in uncharted waters – yet the stock market is priced as if the seas are calm and the skies are clear. As this chart shows, the market is currently trading at a 21% premium to historical levels, which makes no sense to us based on the fundamentals and is instead most likely explained by a combination of likely-to-be-short-term factors: great year-over-year comparisons (it’s easy to show growth vs. the near-Armageddon conditions a year ago), unsustainably low interest rates, excess liquidity, and momentum investing.

Recently Tilson has been on CNBC getting a lot of attention for recommending and disclosing a current position in BP.

Here is what his fund was holding at April 30, 2010. Note that the top 10 holdings make up 65% of the fund's assets. As (almost) always, they have a large position in Warren Buffett's Berkshire Hathaway (NYSE:BRK.A).

Largest holdings (position size):

1) Stock of General Growth Properties (NYSE:GGP) 16.1%

2) Stock and calls of Berkshire Hathaway (NYSE:BRK.B) 13.4%

3) Stock and warrants of Iridium (NASDAQ:IRDM) 9.6%

4) Stock of AB Inbev (NYSE:BUD) 5.5%

5) Warrants on Liberty Acquisition [LIA-WT] 4.9%

6) Stock of Resource America (NASDAQ:REXI) 4.7%

7) Stock of Sears Canada [SCC.TO] 3.0%

8) Stock and warrants of Two Harbors (NYSE:TWO) 3.1%

9) Stock of dELiA*s (NASDAQ:DLIA) 2.7%

10) Stock of American Express (NYSE:AXP) 2.4%

Total: 65.4%

General Growth is up 284% in the last 6 months and has been a homerun for Tilson and his pal Bill Ackman from Pershing Capital, who Tilson piggybacked into this one.

I'll write more later on Iridium and Two Harbors, which are both interesting.

Disclosure: No position in any companies mentioned

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