Market Overview

Whitney Tilson Talks Warren Buffett, Dell on CNBC

Hedge fund manager Whitney Tilson appeared on CNBC this morning to give his opinion of famed investor Warren Buffett's interview.

Tilson stated that he was buying more shares of Berkshire Hathaway on Buffett's recent performance. He stated that the value of Berkshire Hathaway should be trading 50% higher than what it is currently trading at (looking at A class shares). Tilson said that each share was generating $8,000 cash revenue, and therefore it was only trading at 2.5 times earnings.

When asked why investors should invest in Berkshire when their companies can be bought in the open market, Tilson stated that half of Berkshire's funds are in private companies--and you cannot buy those in the open market.

Tilson said that there are periods when the stock is underperforming, and if investors are patient they will be rewarded. Tilson did not want a dividend when Buffett is still at the top of his game picking new investments.

Tilson said that the stock is considerably undervalued at 110% of book value. He believes Buffett will buy stock back very aggressively if the stock continues to drop. Tilson believes Buffett will put in floor if the stock drops 8% from here.

On the question of a successor, Tilson was glad Buffett was not saying who the successor is. If Tilson thought Buffett was leaving in the next year, he would want to know. However, Tilson thought Buffett remained mentally at the top of his game and would likely run the company for another five years.

Tilson thought that five years was a long time, and given the issue with David Sokol, it is better that the successor be unknown until Buffett's time is coming to an end.

Tilson was asked if Buffett's call on housing has dinged his credibility. Tilson said that calling a bottom in housing last year fits with Buffett's track-record, as he is frequently early in his calls.

Tilson and Buffett both own Wells Fargo (NYSE: WFC), and Tilson likes Buffett's portfolio overall. Tilson was curious as to what Buffett's European positions look like. Tilson took a look at IBM (NYSE: IBM) after Berkshire's stake was announced.

On Buffett's recent political foray, Tilson said that he admired that Buffett was getting active in the political process. Tilson did not indicate if he agreed one way or the other, but stated that the country would be better off if more people got involved.

Perhaps most interesting was that Tilson stated that he would be perfectly conformable in having 100% of his personal net worth in Berkshire Hathaway. Tilson stated that Berkshire has never been stronger financially--it is "light years" stronger than it was five years ago, and the stock is just as cheap.

Changing subjects, Tilson also addressed Dell (NASDAQ: DELL), wondering why the company is not buying back more shares. TIlson said that Dell should buy 25% of shares back with current balance sheet and cash flow. Tilson said that Dell is "drowning in cash."

Michael Dell is set to appear on CNBC around 11 am.

Posted-In: David Sokol Michael Dell Warren Buffet Whitney TilsonCNBC Long Ideas News Guidance Short Ideas Hedge Funds Movers & Shakers Economics Markets Media Trading Ideas General Best of Benzinga

 

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