Is this Acceptable?


A reader sent the above link. Click on it and then download the Annual Report for the Tilson Focus Fund, See pages 10-12 discussing the year’s results.

also: TILFX-Fact-Sheet. Why has the fund generated this performance?  What would you advise a client who is in this fund? Note that the money manager has said that he admires Warren Buffett’s letter to shareholders. Compare and contrast his letter with Buffett’s past letters.  Do you understand the results achieved and why?  Can you describe what principles are used to construct such a portfolio.  Note the portfolio!  Comments?  Anything hit you in the face?

I will pay anyone their asking price to give me a cogent explanation how this is acceptable.

Glenn H. Tongue – Portfolio Manager, Tilson Focus Fund

Mr. Tongue is a general partner and co-manager of the Advisor and is the co-manager of the Tilson Growth Fund, LP, the Tilson Offshore Fund, Ltd. and the T2 Qualified Fund, LP. Prior to becoming a general partner and comanager of the Advisor on April 1, 2004, Mr. Tongue spent seventeen years working on Wall Street, most recently as an investment banker at UBS where he was a Managing Director and Head of Acquisition Finance. Before joining UBS, Mr. Tongue worked at Donaldson, Lufkin and Jenrette (“DLJ”) for thirteen years, the last three of which he served as the President of DLJdirect, an on-line brokerage firm. During his tenure there, he oversaw both DLJdirect’s IPO and ultimate sale. Prior to DLJdirect, Mr. Tongue was a Managing Director in the Investment Bank at DLJ, where he worked on over 100 transactions aggregating more than $40 billion. Before working on Wall Street, Mr. Tongue managed sales, marketing and certain operations at Blonder-Tongue, Inc., a manufacturer of pay television and cable television distribution equipment.

Mr. Tongue received an MBA with Distinction from the Wharton School of Business and received a Bachelor of Science in Electrical Engineering and Computer Science from Princeton University. He serves on the Board of All Souls School, an early childhood educational facility, and lives in New York, New York.

20 responses to “Is this Acceptable?

  1. I am setting aside $100,000 for payment.

    • As much as I would love to provide a convincing argument in favour of this Tilson fund, this would be extremely difficult. Many of the funds equity holdings would not fit the bill as “Buffett – sustainable competitive advantage” type companies. Also, the fact that several of these companies were sold as they “weakened” seems un-Buffett like. If they were great companies at fair prices when they were purchased, Buffett would have accumulated more as prices declined. On another note, over the time period discussed its seems as though many of their latest top holdings actually performed quite well..for example Netflix, AIG, AIG warrants, Apple, Iridium. Whatever they sold must have really dragged down the results to end the year at -5%. The bottom line is, this fund doesn’t seem to be a buy and hold value oriented fund. Your $100,000 payment would be nice, but providing a convincing argument in support of this funds philosophy/actions isn’t possible in my mind!! 🙂

      • I do NOT like Mr. Tongue, a man of few words, explanation of performance this year and the past five years. This is what is inexcusable. Parroting how much you admire someone but then doing the opposite.

        • Since inception this fund has has done 0.5%….I assume this is annualize. His long term holders would have almost been better off invested in a savings account at their local

  2. Great sit BTW John!!

  3. Huh. Interesting to see how the retail investor loses out. Tilson & Tongue “divorced” earlier in the year — at least their hedge fund partnership with Tongue starting a new fund. It probably isn’t worthy of disclosure though. see link:

  4. I agree with Mike. If a proper valuation has been done, then Mr. Market is purely giving a greater MOS. Why sell out? He does have his own funds in play, but still no convincing reason why he’s the fund manager to choose. Further, Buffet goes into much greater detail than Tilson’s 4 sentences plus his 5 sentences in the conclusion. He also discusses “unpopular sectors”. Apple and Netflix are
    pretty popular…

  5. Many value-oriented investors that end up with enviable records over the long-term spend multiple years in the bottom quartile of performance.

    • Dear Alex:

      I agree. Look at the record of Charles Munger. He had two (2) 33% down years in a row! Many would not have survived that decline with the typical client?

      However, I am trying to stress the point of a coherent philosophy with transparency. If you read the letter from pages 10 through 12 in the Tilson Focus Fund and you are a new shareholder, would you have any understanding of what occurred over 2012 versus prior years?

      There are many who can be glib and slick, but WHERE ARE THE CUSTOMER’S Yachts?

  6. It’s difficult to tell from this post what is your comment and what is the actual content of this post. Is it Tongue’s bio? I like your blog but some structure and consistency to the posts would be very helpful

    • Fair comment. The Tongue bio is up there for two reasons–1. He is the PM and he wrote the letter. 2. Going to business school, working on Wall Street, being a banker is not relevant for being an investor. Yes,I did those things too (except go to school) This isn’t to attack Tilson/Tongue because their letter is typical of many money managers.

      This blog is used to teach, post as a bulletin board for my future reference, solicit ideas–most readers have more experience than me–so the structure is open-ended.

      Any thoughts for improvement are welcome.

      • Hope this isn’t irrelevant to the discussion, but when you say you didn’t go to school did you not go to undergrad or were you referring to the MBA? I know based on various posts you seem to have a very unique and interesting career path!

  7. I’m a believer that all performance isn’t created equal (in the sense that two managers can have the same return but it achieved in vastly different ways), so I don’t think their weak performance alone should be the determining factor in deciding whether or not this will translate to an enviable long-term record.

    With that said, I agree with some of the above comments saying that Whitney seems to say one thing and do another when it comes to the actual portfolio. Without getting into a debate about each individual holding, I do think that after looking through the portfolio it is blatantly obvious that he is not implementing a Buffet approach. He implements more of a go-anywhere value strategy that covers not only the geographic and market cap spectrums, but also the value spectrum. Now this is fine and there are managers who can do it well, they tend to have a clearly defined process for doing so and don’t claim to be implementing a different approach.

    Additionally, the impression that I do get is that he/they seems to love the culture of value investing. I’ve noticed he/they tends to be very active in a lot of stocks that well regarded value managers are in–JCP & BK (Ackman), AIG (Berkowitz), Sears (ESL), Promotora/Grupo Prisa(Carlos Slim, Berggruen, David Marcus), and he flipped around on Netflx a couple of times which was unusual for several reasons. I’m being maybe too simplistic here, but I do get the sense that he trails on a lot of big/popular investment ideas that originate elsewhere (which is a fine way to generate ideas in itself) and simply picks the ideas he likes most. Again, this is ok in itself, but I think this actually leads his process. Now, where I get suspicious is that he then he gets the PR/Media machine rolling and starts doing a tour touting these ideas. (His HF was only a few hundred million in assets, yet he gets paraded around like an Ackman or Einhorn on the networks). This strikes me as he’s a bit too promotional and most interested in playing the role of hedge fund manager. This is purely anecdotal, but I’m fairly convinced that there is an inverse relationship for PM’s between media exposure and investment performance.

    So, short response: no, the commentary is not acceptable. Also, I wouldn’t hold my breath thinking that this portfolio will mean revert and achieve its “fair value” as I think that side of the equation is more of a moving target for Tilson than most other value managers.

    The real shame is I think this terrible performance makes people overlook the Tilson Dividend fund, which is managed by Zeke Ashton who is excellent.

    • Great insights. Perhaps Zeke can break away. Another aspect of the fund that has not been mentioned is how rapid is the turnover? If you see turnover above 100% a year then you know something is amiss.

      The problem with not having a clear philosophy is how do you learn from mistakes. Look at the large position of IRDM. But I am biased because I am short IRDM. No satellite company in history has ever made money WITHOUT subsidy.

  8. There were two Portfolio managers with different styles. Investment style was not very clear by looking at various stocks. Performance was poor for most period except in 2009-20010. Now only manager manages the fund.

    I also want to clarify the other fund TILDX is managed by a different investment manger Zeke Ashton. That has much better track record and not to be confused as its under the same umbrella.

  9. Yes, I agree that the Dividend Fund is well-managed.

  10. Also contrast the commentary provided by Zeke for TILDX. He has the following sections
    – Thoughts on the Fund’s Recent Performance ( 20 lines)
    – Strategy Review – 12 lines.Very good
    – Portfolio Update
    – Commentary on Fund Holdings ( highlights 2 holdings)
    – Conclusion

    For TILFX you have
    – Thoughts on the Fund’s Performance ( 4 lines)
    – Conclusion!

    There is no comparison. I believe if the TILDX fund was under any under umbrella, it would be a several times of the current AUM!

  11. Why in the world is Netflix in the portfolio, being 11.4% of the fund. Is this not a value fund?

  12. T2 is obviously using a Francisco d’Anconia style tactic to destroy the capital of those too lazy to do their homework. Perfectly acceptable.

  13. Good rule of thumb with satellites – buy only after the sats are up and the inevitable bankruptcy and refinancing is complete. Never, ever buy before the sats are up.

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