Article/Sina Financial Opinion Leader (WeChat official account kopleader) columnist Berry Research
We have been in a blind and optimistic long-term bull market for nearly ten years. In such a long period, investors can easily learn many wrong experiences. Whether for the market as a whole or for individual stocks, the fundamentals will change. If the fundamentals change, the practice of always bargain hunting may lead investors to the abyss of destruction.
Can you say two American stocks that you are optimistic about and why?
Since I closed my hedge fund in September last year (I am currently preparing to launch an independent management account business), I have been in cash for most of the time, and I am also preparing for Keith Education. But in November, I invested the funds in my daughter's college account, 1/3 of which went to Berkshire Hathaway, 1/3 to Howard Hughes, and the last 1/3 went to Amazon, Facebook, and Google on average. When I last checked, this portfolio rose by 16%, and the S&P 500 index rose by 8% in the same period. The best thing is, I didn't bother at all.
Everyone knows Buffett's masterpiece, Berkshire Hathaway, which is one of the best performing stocks in history. However, compared with its intrinsic value, the company's current share price still has a discount of about 10%. I think it may perform better than the S&P 500 in the long run, so holding it will not keep me awake at night.
Howard Hughes owns and develops 34 real estate projects in the United States, the most famous of which include South Street Seaport in New York, Ward Center in Honolulu, Bridgeland in Houston, and Summerlin in Las Vegas. These projects are difficult to value, but I have added up the main assets of Howard Hughes, and I expect their value to be at least 50% higher than the current stock price of the company. In addition, I think the reopening of the South Street Seaport after renovation will be a catalytic factor for the stock in the near future. The South Street Seaport is magnificent and unique.
As for Amazon, Facebook and Google, I don't think I understand their business better than other investors. I just think they are obviously among the best and most important enterprises in history, and there is also a lot of room for growth in the future. Their shares can at least double from today's level in five years.
What will happen to the US market next? Will we usher in a mean reversion, and will the value strategy revive? Will the market be flat? Or downward?
I think the US economy is quite healthy, and corporate profits are expected to remain strong, but the valuation is also relatively high (but there is no bubble yet). Taking these factors into consideration, my guess is that the S&P 500 will have an annual compound growth of 5% in the next five to ten years, which may disappoint many investors, but I think it will be better than most other major markets. As for the situation that the classic value stocks have lost significantly in the past few years, I really think that the situation will reverse, and the market always does.
What Chinese stocks do you like? Would you consider buying Chinese A-shares?
I think China has a lot of investment opportunities, and I know that many people are profiting from these opportunities, but I think investors must have a full understanding of the country itself and its legal system, business culture and language before they can invest there. I don't have this knowledge, so I regard China as something beyond my ability, so I don't consider investing in China.
ETFs (exchange traded funds) have attracted a lot of funds into the market. But the funds introduced by ETFs are no different at the company level. They invest in a company not because of its advantages, but generally because it is a constituent stock of an index. Is passive investment good or bad for the economy, or is it neutral?
I think that the transfer of a large amount of funds to passive investment has not had a great impact on the economy, but in general, it is a good thing for investors, because it reduces the friction costs in the investment system (most of them are detrimental to value). If we think from the perspective of limit, if everyone does this, the utility of passive investment will disappear, because there must be some active investors to form pricing. But I don't think this will happen. It is human nature to surpass mediocrity.
What do you think of Tesla's current situation?
I think Elon Musk, like Steve Jobs, is a genius, very creative and eccentric. Everything he built from scratch in Tesla is very impressive, but I think his achievements in SapceX are even more remarkable. One important difference is that he does not need to deal with some troublesome and time-consuming affairs related to public companies in SpaceX. Therefore, I think that Tesla's becoming a private company will enable him and Tesla to perform better.
Nevertheless, I think that the few investors in the world who have enough financial resources to support this privatization transaction may not really do so, so I think Musk may have to shoulder the burden of being the CEO of a public company, just like Jobs. To do this, I think he needs to be more mature, because some of his behaviors, especially in recent months, are really crazy.
In other words, if anyone wants to privatize Tesla, it is most likely that the Saudis, because holding Tesla can help them hedge the most adverse scenario - that is, the rapid global transition to electric vehicles will eventually lead to a permanent collapse of oil prices (but this may also lead to Tesla becoming a company with a market value of trillions of dollars).
What investment advice do you think should not be given to novice investors?
Buy whenever there is a downturn. We have been in a blind and optimistic long-term bull market for nearly ten years. In such a long period, investors can easily learn many wrong experiences. Whether for the market as a whole or for individual stocks, the fundamentals will change. If the fundamentals change, the practice of always bargain hunting may lead investors to the abyss of destruction. Ask the people who bought Valeant after it fell 97% from its peak.
So, what is the last advice for aspiring fund managers?
Absolutely, establish your own fund and pursue your dreams! For some people, this is the right advice, but for others, this advice is terrible. I have seen too many people quit their jobs and start their own funds before they are ready. They don't have enough money in their bank accounts, nor do they have enough investment experience, nor have they been honed in entrepreneurial skills, so it is difficult for them to succeed. In the end, they often declare failure after many years of injuries, bringing huge setbacks to their career.
Through Keith Education, you provide courses for investors and ambitious fund managers. You are even teaching in China, and will soon promote the course to Hong Kong. How do you plan to adjust the content of the courses to suit the Chinese audience?
The value investment principles we teach are immutable. Just like Graham and Dodd when they first taught these principles, Warren Buffett and Charlie Munger have pursued these principles in the past half century. These principles - intrinsic value, margin of safety, making the market your servant rather than your guide, etc. - are universal and do not need to be changed for any market. Our lecture on "How to launch and create an investment fund" will be modified for Chinese audiences to reflect different local rules and regulations.
Do you think your investment career is successful?
Yes or no. I have never worked in the financial industry. From my bedroom, I created a $1 million fund and turned it into a well-known enterprise with a management scale of $200 million. I don't think many people have such experience. However, my lack of experience finally emerged. I made many investment and business mistakes and suffered corresponding losses. Finally, I decided to close my hedge fund last September.
These experiences, including successful experience and failure experience, make me and my partner Glenn Tongue very suitable for teaching something to the next generation of investors. We can teach them two things necessary for success: not only do smart things, but also avoid mistakes.
Whitney Tilson is a well-known American investor and writer. He graduated from Harvard Business School and later founded Kase Education to teach ambitious fund managers how to establish their own hedge funds.
Prior to that, he had led Kase Capital for nearly two decades. This is a hedge fund that was founded in his bedroom in 1999. At its peak, the fund reached $200 million. In 2007, he was named one of the 20 stars of tomorrow by Institutional Investor magazine. He also co authored The Art of Value Investing: How the World's Best Investors Beat the Market and Poor Charlie's Almanack. Tilson often contributed to CNBC, Financial Times, Forbes and other media, and also appeared on Bloomberg Finance Channel and Fox Business Channel.
(The author of this article introduces that an investment research institution with a history of 20 years provides the most cutting-edge analysis report for US equity investors.)
