Seeking Alpha
Newsletter provider, fund holdings, insider ownership
Profile| Send Message|
( followers)  

Some investment managers are not secretive about their strategies and willing to share their views with the public. Whitney Tilson is one of them. He co-authored “More Mortgage Meltdown: 6 Ways to Profit in These Bad Times” and has written for various magazines and websites including Forbes, Financial Times, TheStreet.com, Motley Fool and Kiplinger’s. He has also showed up many times on CNBC, Bloomberg TV, and Fox Business Network. Tilson founded T2 Partners with another “T”, Glenn Tongue, in 1999. Since inception, the fund managed to beat the S&P 500 (NYSEARCA:SPY) index on a cumulative basis despite its horrific performance during the past 12 months.

Despite his reputation for picking unloved stocks, Tilson still invests in some stocks that are generally recommended by analysts. Below we compiled a list of stocks with high upside potential in the latest 13F portfolio of Tilson’s T2 partners. All companies have at least $2 billion market cap and average analyst recommendation scores lower than 2.5 (3=Hold 2=Buy). Market data sourced from Finviz.

Company Name

Ticker

Value

Activity

Analyst

DELL INC

DELL

15168

160%

2.3

WESTERN DIGITAL

WDC

7768

142%

2.3

CITIGROUP INC

C

7029

3335%

2.3

MICROSOFT CORP

MSFT

5527

-50%

2.1

GOLDMAN SACHS

GS

5451

New

2.3

ANHEUSER BUSCH INBEV

BUD

4903

-19%

1.6

ACTIVISION BLIZZARD

ATVI

4463

-11%

1.8

WELLS FARGO & CO

WFC

2820

217%

2

CISCO SYSTEMS INC

CSCO

2713

-30%

2.3

XEROX CORP

XRX

2440

8%

2.2

APPLE INC

AAPL

2097

New

1.7

BIG LOTS INC

BIG

1742

New

2.2

SANDISK CORP

SNDK

1614

New

1.8

E M C CORP MA

EMC

1590

-12%

1.8

BERKSHIRE HATHAWAY

BRK.A

1388

0%

1.5

HOLOGIC INC

HOLX

1369

New

1.8

JPMORGAN CHASE

JPM

1263

0%

1.7

MEDTRONIC INC

MDT

607

New

2.4

C I T GROUP INC

CIT

215

-96%

2.2

SEAGATE TECHNOLOGY

STX

145

-98%

2.4

The largest position in Tilson’s portfolio with high upside potential is Dell Inc (NASDAQ:DELL). The fund reported to own $15.2 million worth of DELL at the end of the third quarter, up 160% from the end of June. The average score of analyst recommendation for DELL is 2.3. DELL returned 11.46% since the end of September, beating the 10.46% for SPY in the same period. Wallace Weitz was also bullish about DELL. His Wallace R. Weitz & Co disclosed to own over $80 million worth of DELL stocks at the end of September. We like this stock pick too. Dell is getting rid of its low margin businesses and as a result its quarterly revenue is below estimates. However, the company is profitable and trading at very low multiples.

Tilson was also bullish about Western Digital Corp (NASDAQ:WDC) and Citigroup (NYSE:C). During the third quarter, T2 Partners significantly increased its stakes in these two positions, more than doubling its position in WDC and increasing the C position by 3335%. At the end of September, the fund had $7.8 million invested in WDC and $7.0 million invested in C. WDC was up 13.02% so far since the end of September, and C returned 7.3% during this period.

In addition to Citigroup (C), Tilson was bullish about a few other financial stocks, such as Goldman Sachs Group (NYSE:GS). His T2 Partners initiated a brand new $5.5 million GS stocks over the third quarter. GS returned 1.77% since the end of the third quarter, and the analyst recommendation score for GS is 2.3.

The stocks in T2 Partners’ portfolio with the lowest average analyst recommendation score, thus the highest upside potential, were Warren Buffett's Berkshire Hathaway Inc (NYSE:BRK.A) and Anheuser Busch Inbev Sa Nv (NYSE:BUD). The recommendation score for BRK-A is 1.5 and the number is 1.6 for BUD. Both positions generated better-than-market return since the end of the third quarter. BRK-A gained 10.96% and BUD was up 13.25% during that period.

Other stocks with high upside potential that Tilson is bullish about include Microsoft Corp (NASDAQ:MSFT), Activision Blizzard Inc (NASDAQ:ATVI), Wells Fargo & Co (NYSE:WFC), Cisco Systems Inc (NASDAQ:CSCO), Xerox Corp (NYSE:XRX), and Apple Inc (NASDAQ:AAPL). Tilson didn’t perform well so far this year but we like his current portfolio because it has a lot of high quality cheap stocks with huge long-term potential.

Disclosure: I am long C, MSFT.

Source: Whitney Tilson's Stock Picks With High Upside Potential