In his latest investor letter, Whitney Tilson informs his investors that he carefully analyzed his entire short book and that he’s convinced he will be making money on these shorts no matter what happens in the stock market. Tilson is so confident he claims, excluding early 2008, his short book is the most attractive it’s ever been.
Whitney Tilson’s T2 Partners incurred heavy losses in their short book during the fourth quarter of 2010. This caused them to lose 3.3% during the fourth quarter and underperform the S&P 500 index by nearly 5 percentage points in 2010. The last time his short book performed this badly was at the end of 2007, and he says he’s glad he didn’t cover shorts like Allied Capital, MBIA, and Lehman Brothers then.
Here are the top 10 stocks Whitney Tilson is heavily short right now:
1. AIG: Bruce Berkowitz made a ton of money last year in AIG. FrontPoint Capital’s Steve Eisman was also one of the losers.
2. SPDR S&P Homebuilders ETF (XHB) and iShares Dow Jones U.S. Home Construction (ITB): Tilson is short various homebuilders and one ETF (XHB). His short positions in homebuilders could be approximated by shorting XHB and ITB.
3. InterOil (IOC): Whitey Tilson has been very bearish about InterOil since last summer when the company was valued at $2.9 Billion. He added to his shorts at that time. Today InterOil’s market cap is nearly $3.4 Billion. However, George Soros‘ hedge fund Soros Fund Management disclosed a 11.9% ownership in InterOil in November.
4. ITT Educational Services (ESI): Tilson has been short ITT Educational Services for a while now. FrontPoint’s Steve Eisman is also shorting for-profit education companies. However, there are other hedge funds who are on the long side. Richard Blum’s Blum Capital owns more than 12% of ESI. Chase Coleman’s Tiger Global owns more than $300 Million of Apollo (APOL), another for-profit education company. Lee Ainslie’s Maveric Capital has nearly $400 Million of APOL. Richard Blum also owns a large stake in Career Education Corp (CECO), which saw significant insider buying in November and December.
5. Lender Processing Services (LPS): There are allegations that LPS is involved in possibly fraudulent/questionable mortgage forclosure practices.
6. Lululemon Athletica Inc (LULU): Lululemon’s products were endorsed by Oprah last November. Since then, the stock went up by around 30%. Tilson thought Lululemon was overpriced when it was $44 trading at 54 times earnings. Today LULU is 50% higher and has a P/E ratio of 50.
7. MBIA (MBI): Whitney Tilson has been shorting MBIA for a very long time. What’s interesting here is Bruce Berkowitz disclosed an 11% stake in MBIA in July when the stock was trading around $6. This was around the time when Berkowitz increased his AIG stake to 24%. MBIA has doubled to $12.55, and AIG went up by more than 50%.
8. Netflix (NFLX): We have extensively covered Tilson’s Netflix short. Tilson says Netflix is a great company but extremely overvalued. Jim Chanos could be shorting Netflix as well.
9. Salesforce.com (CRM): salesforce.com is another company Tilson thinks is extremely overvalued. Insider Monkey, your source for free insider trading data, has reported significant insider selling in Salesforce.com shares as well.
10. St. Joe (JOE): David Einhorn publicly announced that he is shorting St. Joe. This is also another company in which Bruce Berkowitz has huge positions.
