Whitney Tilson and T2 Partners’ Returns and Alpha

Whitney Tilson is getting a lot of coverage because of his Netflix (NFLX) short. Since September 1st the stock market took off but Whitney Tilson’s T2 Partners lost 2% because of the performance of their short book. One might wonder whether Whitney Tilson even knows what he is doing. Is he just another value investor trying to imitate Warren Buffett or other hedge funds (see Warren Buffett‘s stock picks)? He personally said that he sometimes monkeys other hedge funds’ purchases. Is it even possible to generate alpha by imitating Warren Buffett or other hedge fund managers?

T2 PARTNERS

Insider Monkey, your source for free insider trading data, estimated Whitney Tilson’s monthly returns from a historical return chart. We measured each data point’s location relative to the lines on the graph and interpolated its value. For the past year’s returns we used his monthly investor letters which are all over the internet. Since he also provided year-to-date returns in his monthly letters, we were able to calculate the returns for missing months. Here are Whitney Tilson and T2 Partners’ monthly returns in 2010:

Jan-10 -1.7
Feb-10 7.0
Mar-10 4.6
Apr-10 -2.6
May-10 -2.8
Jun-10 4.2
Jul-10 3.5
Aug-10 -1.5
Sep-10 1.7
Oct-10 -1.8
Nov-10 -1.9

We analyzed T2 partners’ alpha in 3 year increments (and we used Carhart’s four factor model to calculate alpha). Usually one shouldn’t really pay any attention to any funds’ first 3 year performance. If they didn’t really performed satisfactorily, they wouldn’t be here today. If they can consistently achieve the same return over time, then it is a different story. Whitney Tilson had a monthly alpha of 93 basis points during his first 3 years. That’s a spectacular performance-  but he couldn’t keep it up. Between 2002 and 2004, Whitney Tilson had a monthly alpha of only 37 basis points. You should keep in mind that we used “net returns”, so Tilson’s investors benefit as long as he has positive alpha. Between 2005 and 2007, his alpha went down to 14 basis points. However, since 2008 Whitney Tilson achieved a monthly alpha of 64 basis points. His market beta was only 0.22 during this time period, but his “value effect” beta was 0.68 implying that he was investing in distressed/value companies.

Since 2005, Whitney Tilson achieved an alpha of 41 basis points per month after fees. Considering Warren Buffett didn’t have any alpha from 2000 to 2009, this is quite an achievement for a Buffett fan. His investors benefitted to the tune of 5 additional percentage points per year – which is nothing to sneeze at. Previously we found that Daniel Loeb had an alpha of more than 7 percentage points. Insider Monkey will also calculate the alphas of Whitney Tilson’s mutual funds to see whether small (individual) investors benefitted from his investment skill.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!