GO
Loading...

Whitney Tilson: Lululemon, Groupon and Other Overvalued Stocks

Hedge fund manager Whitney Tilson of T2 Partners is famed for his regular Value Investing Congress.

However, you may be more familiar with him as the money pro who shorted the housing sector ahead of the subprime crisis. Ever since, the Street has been interested in his current short positions. And Tilson, who is also a CNBC Contributor, tells us one of his shorts, about which he feels most confident, is LuLulemon.

(If you're looking for Tilson's long-term buys, click here.)

Lululemon

“The key thing when you short is to make sure you’re not wrong on the fundamental intrinsic value,” he says.

And even though Lululemon has gained substantially he thinks it’s only a matter of time before the momentum runs out.

“We’ve gone back and we did the work again,” he says. “It’s a fine company – but we’re short because it’s trading at 10.6 times sales – and 41 times earnings – and operating at 20% net margins.”

He goes on to say historically, in retail, those metrics don’t add up.

“We’re staying with the short – mathematically I feel almost certain that a company this overvalued will reward on the short side.”

--------------

Groupon and LinkedIn

Tilson is also short Groupon and LinkendIn.

“This is a classic fad/slash speculative stock market bubble,” he says. “There’s a real company in Facebook and then a lot of pretenders riding their coat tails.”

Part of his bearish thesis stems from a belief that bulls think these companies warrant Facebook metrics.

“Investors are using the $100 billion expected for Facebook as a benchmark, and then reasoning that these names are cheap. That’s just silly.”

“LinkedIn is a good business but at 16.5 times revenues and a $10 billion market cap it’s overvalued,” Tilson says.

“And as for Groupon, I subscribed and it feels like spam to me and I don’t see any real barriers to entry. There’s some value but it’s way south of where the stock is now.”

--------------

GreenMountain

Tilson has been bearish on Green Mountain for quite some time and despite recent gains he remains skeptical.

“We’re still short because if you look at sell through data – it is not showing the unbelievable sales that Green Mountain is reporting – inventories didn’t come down as much as I would have expected them to.”

Also he feels the Street isn't factoring in a big headwind.

“The patent on their K-Cup products goes off and there will be a lot of competitors.”

Tilson sees the situation as comparable to the situation faced by Pfizer as Lipitor comes off patent. “When the drug comes off patent, pricing goes down and the stock reflects the change,” he says.

“But in this case, Green Mountain is spinning a story that when the patent comes off they won’t see a decline in market share – and that’s just silly.”





______________________________________________________
Got something to to say? Send us an e-mail at fastmoney-web@cnbc.com and your comment might be posted on the Rapid Recap. If you'd prefer to make a comment, but not have it published on our Web site, send those e-mails to fastmoney@cnbc.com.


Trader disclosure: On Feb 16, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Terranova is long HPQ; Terranova is long IBM; Terranova is long OXY; Terranova is long SBUX; Terranova is long MSFT; Terranova is long YUM; Terranova is long VRTS; Terranova is long MCD; Terranova is long EMC; Terranova is long SWN; Terranova is long LQD; Terranova is long TBT; Terranova is long FXE

For Whitney Tilson
Funds managed by Whitney Tilson are long
Funds managed by Whitney Tilson are long BAC
Funds managed by Whitney Tilson are long C
Funds managed by Whitney Tilson are long GS
Funds managed by Whitney Tilson are long JPM
Funds managed by Whitney Tilson are long WFC
Funds managed by Whitney Tilson are long NFLX
Funds managed by Whitney Tilson are long JCP
Funds managed by Whitney Tilson are short
Funds managed by Whitney Tilson are short GMCR
Funds managed by Whitney Tilson are short LNKD
Funds managed by Whitney Tilson are short GRPN
Funds managed by Whitney Tilson are short IOC
Funds managed by Whitney Tilson are short CRM

For Patty Edwards
Trutina Financial is long APPLE (AAPL)
Trutina Financial is long SPDR Gold Trust (GLD)
Trutina Financial is long INTEL (INTC)
Trutina Financial is long CSTR

For Brian Kelly
Kelly is long GLD

For Jon Najarian
Pending

For Mark Mahaney
William Reinhardt, CFA, Associate, holds a long position in the securities of Google Inc.
Steven J Fullerton, Associate, holds a long position in the securities of Google Inc.
Neil A Doshi, Associate, holds a long position in the securities of Google Inc.
Rohit Thapliyal, Associate, holds a derivative position in the securities of Amazon.com Inc.
A member of the household of Wenge Yang, Associate, holds a long position in the securities of eBay Inc.
Citigroup Global Markets Inc. or its affiliates beneficially owns 1% or more of any class of common equity securities of Amazon.com Inc, Akamai Technologies Inc, eBay Inc, Netflix Inc, Yahoo! Inc. This position reflects information available as of the prior business day
Within the past 12 months, Citigroup Global Markets Inc. or its affiliates has acted as manager or co-manager of an offering of securities of Google Inc, Groupon, Inc.
Citigroup Global Markets Inc. or its affiliates has received compensation for investment banking services provided within the past 12 months from eBay Inc, Google Inc, Groupon, Inc..
Citigroup Global Markets Inc. or its affiliates expects to receive or intends to seek, within the next three months, compensation for investment banking services from Yahoo! Inc.
Citigroup Global Markets Inc. or an affiliate received compensation for products and services other than investment banking services from Amazon.com Inc, Akamai Technologies Inc, eBay Inc, Google Inc, Groupon, Inc., Priceline.Com Inc, Yahoo! Inc in the past 12 months.
Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following as investment banking client(s): Groupon, Inc., eBay Inc, Google Inc, Yahoo! Inc.
Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following as clients, and the services provided were non-investment-banking, securities-related: Amazon.com Inc, Akamai Technologies Inc, eBay Inc, Google Inc, Groupon, Inc., Priceline.Com Inc, Yahoo! Inc.
Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following as clients, and the services provided were non-investment-banking, non-securities-related: Amazon.com Inc, eBay Inc, Google Inc, Groupon, Inc., Priceline.Com Inc, Yahoo! Inc.
Citigroup Global Markets Inc. or an affiliate received compensation in the past 12 months from Groupon, Inc..
Analysts' compensation is determined based upon activities and services intended to benefit the investor clients of Citigroup Global Markets Inc. and its affiliates ("the Firm"). Like all Firm employees, analysts receive compensation that is impacted by overall firm profitability which includes investment banking revenues.
The Firm is a market maker in the publicly traded equity securities of Amazon.com Inc, Akamai Technologies Inc, eBay Inc, Google Inc, Groupon, Inc., Netflix Inc, Priceline.Com Inc, Yahoo! Inc.

For Liz Dunn
No disclosure

For Michael Pachter
(NETFLIX) WS makes a market in the securities of the subject company.
(COINSTAR) WS makes a market in the securities of the subject companies

For Andy Busch
No disclosures

For Gene Munster
The following companies have been investment banking clients of Piper Jaffray during the past 12 months: ACOM, DANG, DRIV, MOBI, YNDX, YOKU

Other material conflicts of interest for Gene Munster or Piper Jaffray regarding companies in my universe for which I am aware include: ACOM, YNDX, YOKU: underwriting

Piper Jaffray received non-investment banking securities-related compensation from the following companies during the past 12 months: ACOM, DRIV

Piper Jaffray makes a market in the securities of the following companies, and will buy and sell the securities of these companies on a principal basis: AAPL, ACOM, AMZN, BIDU, DANG, DRIV, EBAY, GOOG, IACI, LOGM, MCHX, MELI, MOBI, PRTS, RLOC, SINA, SOHU, VCLK, WWWW, YHOO, YNDX, YOKU



CNBC.com with wires.

Symbol
Price
 
Change
%Change
GMCR
---
LULU
---
GROUPON
---
LINKEDIN
---

Contact Halftime Report

  • Showtimes

    Halftime Report - Weekdays 12p ET
    Fast Money - Weekdays 5p ET