Whitney Tilson is on board with the recurring theme seen amongst hedge funds of pushing long high-quality large-cap trades. His long picks were included in the same year-end letter as his top 10 short positions.
Most of the pain for T2 this year came from the firm’s short positions however it still managed to return 9.1% annualized net versus 2.0% for the S&P.
Tilson has spoken frequently about the names of most of his long-position stocks included in the note but there were a few new ones including Seagate Technology and CIT Group.
STX is trading very cheaply and the worry over the hard drive market have been blown out of proportion so Tilson believes it is poised to do well.
He also believes CIT is favourable because of its potential to capture financing-cost savings. “Even more intriguing is the possibility that a healthy bank might acquire CIT, attracted by the enormous earnings leverage available in applying the acquiring bank’s much lower borrowing costs to CITs business model,” Tilson wrote.
Tilson believes that Warren Buffett interfering with Kraft's proposal to acquire Cadbury did not screw up the deal and they will still make a strong offer. Though he did say it was an unusual move for Buffett.
This is one of the stocks Tilson has talked about less but he likes STX because it is trading at very cheap valuation and the hard drive market is not in the terrible shape everyone thinks it is.
Iridium has some cost challenges because in 2014 its satellites will need to be replaced which will cost $2.7 billion. Tilson thinks the requirement can be met by internally generated cash flow, debt and equity offerings and revenue offsets of hosted payloads.
Tilson has pointed out that ADP has 20% operating margins, solid management and it is four times bigger than its closest competitor. Low interest rates and unemployment have recently had a negative affect on the stock but it is poised to outperform over the long haul, according to Tilson.
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