Prominent value investor and author Whitney Tilson, the founder and managing partner of Kase Management (formerly T2 Partners) has filed his latest 13F with the SEC, disclosing his firm’s equity holdings as of March 31. There was limited turnover in his portfolio during the first quarter, with no new positions being opened, and only one being closed. This is fairly standard for value investors, who have much longer-term outlooks with their investments. Let’s check out the top five value plays of Mr. Tilson through the first quarter of 2015 and have a look at the fundamentals of these companies as well as his thoughts on them courtesy his latest investor letter, a copy of which can be downloaded here.
Tilson’s top pick remains Howard Hughes Corp (NYSE:HHC) for the sixth straight quarter. His position in the developer of master planned communities was increased by 8% during the quarter to 50,425 shares valued at $7.82 million. Tilson has re-evaluated his estimates for the company from three years ago, and believes there is far greater growth yet ahead for the stock.
“At that time, I estimated that HHC’s intrinsic value was ~$125/share. So with the stock now at $144 today, why do I still hold it? Because there have been numerous favorable developments in the past 28 months – the company is executing superbly and the macro environment is providing a strong tailwind – so I believe intrinsic value is likely above $200”, Tilson said in the investor letter.
Before adjustments, Howard Hughes Corp (NYSE:HHC) posted quarterly earnings for the fourth quarter of 2014 that handily beat estimates at $0.51 per share, with estimates coming in at just $0.19. Revenue also destroyed estimates by more than 80%. After dipping to a 52-week low in January, Howard Hughes Corp (NYSE:HHC) has rebounded by more than 25% since, and there appears to be more room for growth as Tilson suggests. Shares are actually down since its last earnings report on March 2, despite the overwhelming positive financial results and the future prospects of the company look good, with over $2 billion worth of projects under construction. While Tilson has the greatest exposure to Howard Hughes in our database, Murray Stahl’s Horizon Asset Management also has high exposure to the stock, along with a very large position of over 5.14 million shares.
Platform Specialty Products Corp (NYSE:PAH) climbs into second position in Tilson’s portfolio, after he increased the position by a hefty 41% during the first quarter. That brought the value of the position up to $6.96 million, with it consisting of 271,140 shares. After nearly doubling in value within mere months of its IPO, shares of Platform Specialty Products Corp (NYSE:PAH) have stalled since, essentially flat over the last 11 months. Not even the involvement of a very different kind of investor to Tilson, activist Bill Ackman, has helped the producer of specialty chemicals to grow during that time. Tilson partially attributes this performance malaise to its rapid growth, which analysts have yet to catch up with.
“In a remarkably short period of time (just over a year), PAH has become a large company (sales and EBITDA this year should exceed $3 billion and $750 million, respectively), yet it’s very difficult to analyze because of the large recent acquisitions and lack of analyst coverage. This weighs on the stock for now, but over the next year I expect PAH to become a more “normal” company and the valuation to reflect this,” Tilson said.
