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Whitney Tilson

 
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  • Why Whitney Tilson Is Wrong About BP [View article]
    I agree with Sahil that it sometimes happens that one does bad analysis and makes a bad investment, yet still makes money on a stock due to nothing more than blind luck. I will leave it to the folks here to read our analysis published at the time (at gurufocus.com/news.php... and marketfolly.com/2010/0...) to answer this question for themselves in this particular case.

    To David's question, we now have a dilemma (one I wish we had more often!): the stock has gone up so much so fast that it's become a very large position, so we will likely begin trimming it before it reaches our estimate of intrinsic value, which is north of $50.
    Aug 10 11:45 AM | 4 Likes Like |Link to Comment
  • Why Whitney Tilson Is Wrong About BP [View article]
    Hi folks,

    I haven't posted on a message board in at least 10 years, but happened to follow this one because of the provocative title ("Why Whitney Tilson Is Wrong About BP").

    With BP's stock up 44% in a mere six weeks (that about 2,500% annualized) since the article was published (within two days of the absolute bottom), I think it's pretty clear who was right and who was wrong.

    But my point here isn't to gloat -- it's to highlight the lessons.

    We always look for contrary data and arguments whenever we're buying anything, so we read the article with interest, but it didn't change our opinion one iota -- in fact, we were loading up on the stock that very day -- because it was focused on all of the wrong things.

    As Buffett and Munger often say, "it's better to be roughly right than precisely wrong."

    This investment was NEVER about exactly what BP's free cash flow is, or how much of cap ex is maintenance vs. growth, whether the company would have to suspend its dividend, etc. The stock was obviously, blindingly cheap ON ANY METRIC -- as long as the short-term costs didn't overwhelm it.

    We publicly shared our detailed analysis (see gurufocus.com/news.php... and marketfolly.com/2010/0...), and made it clear that, based largely on historical precedent, we were betting on the following things:

    1) The well would be capped sooner than expected;
    2) The environmental damage would be less than expected;
    3) The clean-up costs, fines and damages would be less than expected; and
    4) BP's cash flows, borrowing capacity and assets would be FAR in excess of what was needed to cover anything but the very worst case scenario.

    These were the only things that mattered -- and they've all turned out well. Sure, we've gotten a little lucky -- we certainly didn't expect a 44% return in only six weeks -- but under $30, this was a slam dunk. We owe a debt of gratitude to those (most notably Jim Cramer) who were scaring people out of the stock, giving us what will probably turn out to be the best buying opportunity we'll see this year.
    Aug 8 07:28 PM | 11 Likes Like |Link to Comment
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