President's Blog

A Macro Economic Outlook and Stock Picking with Whitney Tilson

October 3, 2011
post contributed by Stephen Nolan

Whitney Tilson, the founder and Managing Director of T2 Partners LLC, shared his current economic perspective with members of the New York Hedge Fund Roundtable at the September event.
 
Beginning with an economic overview, he argued that the Great Recession of 2008 was more severe than originally thought. Citing revised GDP numbers, the original bottom of economic activity in 2008 has since declined by double the original number. Unemployment rates have also remained stubbornly high, he continued, and very few jobs have been created in the last several months.       
 
Tilson also presented several concerns that he said need to be addressed in the near future. Believing that the economy right now is at a tipping point, he noted that depository institution credit outstanding is currently weak and well below the historical average.  With past recessions, the typical job trends have been either a gradual decline and gradual return, or a steep decline with a steeper return. This Great Recession has seen a steep decline with a muted return.
 
Tilson conveyed an optimistic belief that there is always value to be found in any type of market. A few factors in particular that Tilson pays attention to when seeking value are earnings multiples, free cash flow, and margin. Using these variables are key to finding the true undervalue or overvalue of a company, he said.
            
Although we are in volatile times, it is these times where opportunities can be found and taken advantage of, he said. Over a 10 year period, Tilson expects that a portfolio of high value, blue chip, dividend paying stocks will outperform U.S Treasuries, especially given inflation estimates over the coming decade.

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