Contrarian Picks for the Gurus

In his latest column, Validea CEO John Reese looks at some stocks that have been hit hard in the market’s recent downturn, and which now look like bargains.  Reese talks about how top value investors like Whitney Tilson and Warren Buffett use downturns as opportunities to add to their favorite picks — not reason to flee the market. “In the dozen-plus years that I’ve been studying history’s most successful investors, I’ve found that far more often than not they use an approach like Buffett or Tilson — that is, they buy fundamentally sound stocks that others are shunning,” he […]

Tilson on Handling Short-Term Trouble

Value fund manager Whitney Tilson, who has a solid long-term track record but has struggled over the past month, recently talked with CNBC about how to handle short-term losses. Tilson says that as long as he still has strong conviction in his picks, he’ll use short-term declines as opportunities to add to those positions, which he says he’s been doing recently. “A bumpy ride in the short term is fine for us as long as we make very nice money in the long term,” he says. He says he thinks stocks — particularly U.S. stocks — look “pretty cheap” right now, and says he’d be […]

Tilson on “Panicked Headline Investing”

In a recent interview with CNBC, Whitney Tilson talked about why his firm likes to invest in firms that are the subject of “panicked headline investing”. Tilson says that “we love buying stocks when we think the sellers don’t care about price,” and cites BP as an example, saying that the oil giant had such negative publicity after its Gulf of Mexico spill that investors lost sight of value and sold the stock indiscriminately. He’s made a handsome profit on the stock since then, and says he finds similar panic-triggered opportunities quite often. But he says the key is to […]

Tilson: Big Value in Big Caps

Whitney Tilson is finding some of the best opportunities in the market in some of the market’s largest companies. “It’s one of the most attractive areas in the market,” he tells CNBC. “They’re incredible companies that are earning profits and trading at 10 to 12 times earnings with strong balance sheets and they’re returning cash to shareholders — they’re not exciting but if you’ve got a 5-10 year horizon and you want to earn better returns than Treasurys I think they’re the way to go.” Tilson counts Berkshire Hathaway, Coca-Cola, and McDonald’s among his current big-cap favorites. He also offers his […]

How Many Stocks Is Enough?

How many stocks should an investor own in order to diversify away stock-specific risk? Some interesting data shows that it may be fewer than you think. The data comes from hedge fund guru Joel Greenblatt’s book, You Can Be A Stock Market Genius, and was highlighted by top value investor Whitney Tilson a few years back (and recently reprinted on The Motley Fool website). According to Greenblatt’s book, the risk-reduction benefits of adding more stocks to your portfolio significantly decreases once you get to about 20 or so stocks. Tilson, citing the data, said that “owning two stocks eliminates 46% of […]