Monday, February 7, 2011

Whitney Tilson's Two Largest Positions: MSFT & BRKa

Whitney Tilson talks his two largest holdings, Microsoft (MSFT) & Berkshire Hathaway (BRKa), in his latest letter:

We have recently been adding to Microsoft and Berkshire Hathaway, which are now our two largest positions.

He later added:
-The balance sheet is Fort Knox
-The company bought back $ 5.1 billion of stock during the quarter (a rate that retires 8% of its shares annually
- Net of cash, the stock trades for 10.1x trailing EPS

Despite all of this, the stock fell after Microsoft announced earnings, due no doubt to the consensus view that Microsoft is a fading giant, doomed to a future of lower market share, sales, margins and profits. It is of course possible to concoct such a scenario – people have been doing it for well over a decade – but there is no current evidence to support it. Microsoft’s market share in its key business areas is stable or rising, and sales, margins and profits are growing nicely.

A value-oriented investor with a large position in Berkshire Hathaway isn't exactly surprising.

On the other hand, the number of proven value-oriented investors that have accumulated shares in big cap tech stocks like Microsoft is, on the surface at least, a bit surprising. Most of these investors wouldn't go near tech a decade ago.

It's easier to understand after considering the margin of safety provided by what seems to be extremely low valuations in big cap tech land.

Adam

I have long positions in both MSFT & BRKb
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