Former hedge fund manager Whitney Tilson, the founder of KASE Learning, says that Facebook has a “fixable problem.”
“I like buying stocks of great companies when they’re encountering difficulties that I think are fixable, that are likely to be temporary as opposed to permanent problems. I think Google and Facebook, for example, still have enormous growth opportunity around the world.”
Earlier this year, Tilson said he put his kids’ college savings accounts in only five stocks. The value investor and father of three daughters allocated 50% in Berkshire Hathaway (BRK.A) (BRK.B), 25% in Howard Hughes Corporation (HHC), and the remaining 25% split evenly among Facebook (FB), Google’s parent company Alphabet ( GOOGL), and Amazon (AMZN).
Tilson takes a “buy and forget about it” approach with a 3-5 year horizon for those investments. He added that Facebook and Google have the “best business models” he’s ever seen and they’re attractive while trading at market multiples.
“I have no short-term forecasts. There’s a lot of headline risk in them in the short term,” he noted.
With Facebook, Tilson expects that CEO Mark Zuckerberg and COO Sheryl Sandberg will remain at the helm, describing them as as “super smart” “talented” people. They now have the potential to make some healthy changes at the company.
“I think they were very blind to a lot of bad things going on in Facebook. And when they became so dominant, so powerful, and had this sort of naive utopian view of, ‘This is all good, etcetera.’ Now, they’re going to have to invest tens of billions of dollars into monitoring this site and cleaning things up. I think that’s healthy. I think they have profit margins that can support that. This is what I view as ultimately a fixable problem.”
Tilson, 52, closed his hedge fund, Kase Capital, in September 2016 after nearly two-decades in the money management business, citing sustained underperformance in a market characterized by high prices and complacency.
At the beginning of 2018, he set up Kase Learning as a way to help aspiring hedge fund manager avoid the mistakes he made. Kase Learning offers a bootcamp called “Lessons from the Trenches: Value Investing, Entrepreneurship & Life” and a one-day seminar on how to launch and build a hedge fund.
Kase Learnings will also host a shorting conference on Monday with Yahoo Finance joining as the exclusive broadcast partner.
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Julia La Roche is a finance reporter at Yahoo Finance. Follow her on Twitter.