NETFLIX (NFLX): Whitney Tilson Nails It on the Head - Short NFLX $210.00

Whitney Tilson Hits the Nail on the Head

NETFLIX (NFLX): Whitney Tilson Nails It on the Head

Analysis of Whitney Tilson's NFLX Article

Update:   1/27/11  EXHAUSTION GAP

When the timing of a trade is "pre-mature" it is often considered that the investor or trader is "wrong" because the position is running against them.  While this may be correct in the short term, in the long term the trade thesis may still be correct. This is the case with Netflix (NFLX) and shorting the stock to a proper valuation. Netflix has been over-valued for some time. The problem with short-selling this company is that 'timing' is crucial, and because of its small float, the short-sellers can be squeezed to cover at a much higher price than the company is worth.

But, the float is really 50 million shares? It trades like it has maybe 10 million shares in the float.  It looks like some of these institutions will need to do some selling soon, as Netflix's business model and advantage as "first mover" erodes away. Costs will also cut in to their profits, and eventually produce losses on their income statements (in the not so distant future).

Trading Information 1/27/11  EXHAUSTION GAP

Just ask Whitney Tilson, who has been shorting the stock for some time now.  There is no doubt in my mind that eventually Tilson will nail this trade, as it provides an excellent Risk-to-reward ratio on the short side.

The day after the company announces earnings, the stock is gapping up to near $200.00 per share. This provides an excellent short-selling opportunity for savvy traders with a bit of patience.   With a valuation of over 10 billion dollars for this company, each of its 20 million 'subscribers' is worth roughly $450 dollars. The basic concept is that there are 20 million (idiots or old people) who are currently paying for Netflix service. Apparently, these people do not use youtube, or other video sites, and refuse to download peer-to-peer sharing software, for various legal or technical issues.

Lets Look at the Tilson Article:

We've lost a lot of money betting against Netflix (NFLX), which is currently our largest bearish bet, in the form of both a short and put position. In this letter, we share our investment thesis in depth and describe why, at a stock price of $178.50 and a market cap of $9.3 billion (based on yesterday's close), we think it's an exceptional short idea.

Lets just look at a quick overview of his reasons for establishing this bearish position. Keep in mind, these guys like Tilson are pros; they have seen these things happen time and time again, and with patience, due diligence, and some good analytical skills, they are continuously able to nail excellent trades over the long term. I will highlight some key points from the main NFLX article http://seekingalpha.com/article/242320-whitney-tilson-why-we-re-short-netflix

Overview of Netflix

"Our favorite shorts generally involve some or all of the following characteristics: outright frauds (our very favorite), industries in decline or facing major headwinds, lousy or faddish business models, bad balance sheets, and incompetent, excessively promotional and/or crooked management. In general, we prefer to short businesses with these traits, even when their stocks trade at seemingly low valuation multiples, rather than shorting the stocks of good businesses with strong managements, even at high valuations. Sometimes, however, the valuations become so extreme that we will short the latter, but generally only when we believe there is a catalyst that will impact the company and cause the stock to fall.

Netflix falls into this latter category. We acknowledge that the company offers a useful, attractively-priced service to customers, is growing like wildfire, is very well managed, and has a strong balance sheet. (It doesnt look so strong to me).

So why on earth would we be betting against this stock? In short, because we think the valuation is extreme and that the rapid shift of its customers to streaming content (vs. mailing DVDs to customers) isn't the beginning of an exciting, highly-profitable new world for Netflix, but rather the beginning of the end of its incredible run. In particular, we think margins will be severely compressed and growth will slow over the next year.

Netflix business model

Netflix's core business model is buying DVDs and then renting them to its customers, who pay a fixed monthly fee for unlimited rentals delivered by mail plus unlimited streaming (the fee varies by how many DVDs can be out simultaneously; currently it's $9.99/month for one DVD, up to $55.99/month for eight DVDs; there's also a bare-bones two-rentals/month plan for $4.99 and a streaming-only plan for $7.99 monthly).

Netflix's customers have responded by rapidly switching: in its most recent quarter (Q3), the company said that 66% of its subscribers watched instantly more than 15 minutes of a TV episode or movie compared to 41% for the same period of 2009, and 61% for the second quarter of 2010. In Q4, a majority of Netflix subscribers will watch more content streamed from Netflix than delivered on DVD.

So many of Netflix's 16.9 million customers are streaming videos, in fact, that they account for 20% of all internet traffic during a typical evening, according to Sandvine, which makes network-monitoring equipment. (We find this number hard to believe, but anything close to it is still very substantial.)

We don't believe that Netflix has a better business model, better management or a meaningful competitive advantage in the business of streaming movies and TV shows. It does have a brand name and 16.9 million customers, but Netflix's brand and number of customers pale in comparison to its new, direct competitors like Apple (iTunes), Google (GOOG) (YouTube), Amazon.com (AMZN) (Amazon Video on Demand), Disney (DIS) and News Corp. (NWS) (part ownership of Hulu), Time Warner (TWX, TWC) (cable, HBO, etc.), Comcast (CMCSA) (cable, NBC Universal, part ownership of Hulu), and Coinstar's Redbox (CSTR) (30,000 kiosks renting DVDs for $1/night and email addresses for 21 million customers).

In short, Netflix is moving from a business in which it was competing against smaller, dying, heavily-indebted companies with inferior business models to some of the largest, most powerful, aggressive and deep-pocketed companies in the world, which have big competitive advantages over Netflix.

Great point Mr. Tilson. Lets have a look at how indebted NFLX is, looking at their current balance sheet.

Quick Snapshot:

Holy cow, look at that debt-to-equity ratio. 123 ratio, where typically a healthy company has a ratio of under .5 and under 1 for companies that utilize a significant amount of leverage. The book value of 3.67 dollars is also not attractive at all for an asset that is trading at 200.00 per share.

Ok, well there you have it. The Net Tangilble assets are merely 191MM. The bulk of this extra equity comes from "Other Current Assets".  At least they don't have a bunch of goodwill and intangibles on their sheet, although that is probably where those assets are categorized.

Tilson continues,  "We can't predict the outcome of the fierce competition that is emerging, but we believe it is quite likely that it will result in slower growth and a contraction in Netflix's mouth-watering margins (last quarter, Netflix had a 12.6% operating margin and 6.9% net margin)."

We can then look at the quarter over quarter income statement.

INSIDER SELLING UPDATE:

Net Share Purchase Activity

Breakdown

When asked on last quarter's conference call whether competition would impact Netflix's margins, CEO Reed Hastings replied: "You tell me what happens with competition, and I'll tell you what happens to margins."

1) Here's an excerpt from a recent article in the NY Times entitled "Time Warner Views Netflix as a Fading Star":

For the past year, executives at big media companies have watched Netflix with growing resentment - for its success in delivering movies and television shows via the Internet, for its stock price nearly quadrupling, for its chief executive being named businessperson of the year by Fortune magazine.

Now many of the companies that make the shows and movies that Netflix delivers to mailboxes, computer screens and televisions - companies whose stocks have not enjoyed the same frothy rise, and whose chief executives have not won the same accolades - are pushing back, arguing that the company is overhyped, and vowing to charge much more to license their content.

"It's a little bit like, is the Albanian army going to take over the world?" said Jeffrey L. Bewkes, the chief executive of Time Warner, in an interview last week. "I don't think so."

Netflix has been a business partner to the movie and television studios through licensing deals, but increasingly it is seen as a partner with its hands far deeper in the pockets of the media companies than anyone thought. Through its success, the company has positioned itself at the center of the media universe - at the nexus of technology and content - and is now finding it a place increasingly under attack.

... Mr. Bewkes explained that in the late 1990s the media industry embraced Netflix as a new distribution outlet for renting DVDs - without foreseeing that the company would eventually accelerate the decline in the sales of DVDs, which for years had been the lifeblood of the film industry. Now, with its success online, Netflix has raised fears that consumers may stop paying for cable television - the much-debated phenomenon of cord-cutting.

2) Here are excerpts from a recent Wall Street Journal article entitled, "Netflix Rattles Rivals as It Expands on Web: Pay-TV Services, Others Plot Moves to Counter Movie Juggernaut; Hollywood Cautiously Cuts Deals":

After years as a bit player in entertainment, Netflix Inc. is being eyed for a new role by Hollywood: industry hulk.

The Silicon Valley company has successfully expanded its mail-order DVD rental service to delivering video online. Meantime, the rise of Internet-connected TVs and disc players means that Netflix's electronically streamed movies and TV shows are reaching living rooms, not just computers.

All that poses a potential threat to the traditional ways consumers watch movies and TV: through cable, phone and satellite systems.

...Netflix's growth surge-at a time of weak DVD sales and increasingly fragmented TV audiences-prompts concern among movie and TV studios as well as other technology companies. One big worry is that the company could end up dominating the electronic distribution of movies and TV the way Apple Inc.'s iTunes Store dominates music.

To prevent that, entertainment and technology companies are exploring plans to outflank Netflix with their own offerings.

3) Finally, here are excerpts from a recent New York Times article entitled, "Netflix's Move Onto the Web Stirs Rivalries":

In a matter of months, the movie delivery company Netflix has gone from being the fastest-growing first-class mail customer of the United States Postal Service to the biggest source of streaming Web traffic in North America during peak evening hours.

That transformation - from a mail-order business to a technology company - is revolutionizing the way millions of people watch television, but it's also proving to be a big headache for TV providers and movie studios, which increasingly see Netflix as a competitive threat, even as they sell Netflix their content.

... "Right now, Netflix is a distribution platform, and has very little competition, but that's changing," said Warren N. Lieberfarb, a consultant who played a critical role in creating the DVD while at Warner Brothers.

... "How did Hollywood end up supplying Netflix in the first place, particularly a product that was given to them on a flat-rate, wholesale basis?" said Jonathan A. Knee, a media investment banker and co-author of "The Curse of the Mogul."

... Netflix is increasingly viewed as a threat by cable companies and movie studios, who are considering a variety of ways to put the brakes on the company's growth.

"Though already a significant customer, they've grown faster than anyone anticipated, and going forward we expect the economics to improve significantly," said John Calkins, executive vice president of digital and commercial innovation at Sony Pictures Home Entertainment.

For example, big media companies like Time Warner are moving quickly to offer their own streaming products. Studios have pushed back on release dates, requiring Netflix to wait through a window of 28 days while studios pushed more expensive and lucrative sales of the DVD and on-demand versions on cable.
And the studios are positioning themselves to demand more money in future negotiations over streaming rights, especially next year when Netflix's deal with Starz expires.

4) A final data point: We were recently at a lunch at which Jeff Zucker, the outgoing CEO of NBC Universal, was asked about licensing NBC's content to Netflix. His reply: "We'd be happy to - for a lot of money!"

Netflix's Dilemma

Why is Netflix's streaming content so weak? The primary reason is that, unlike its competitors, Netflix isn't willing to pay what content providers demand for the best movies and TV shows. For example, Netflix's competitors typically charge $4.99 to stream a popular movie, of which $3 goes to the content provider, and the economics are similar for the $1 TV shows.

But this model doesn't work for Netflix because it's only charging $7.99 per month for unlimited streaming. Given that content providers aren't about to slash their prices, Netflix has three choices, all of them unpleasant:

1. It can have a weak library and maintain low prices, or
2. It can license better content and pass the cost along to its customers, which would crimp growth, or
3. It can license better content and eat the cost, which would hurt margins.

None of these options are consistent with a stock trading at nearly 70x earnings.

(Incidentally, in light of Netflix's weak content, we were initially puzzled by the fact that its customers appear to be using streaming quite a bit, but here's what we suspect is happening: many customers have recently switched to streaming and, as new users, they're finding a handful of movies and TV shows they want to watch (hence the high initial usage). But given how thin the content is, they are likely to quickly become discouraged and stop using the streaming service. This will put a lot of pressure on Netflix to strike licensing deals for more content.)

whitney tilson chart 1

tilson chart 2

Here's is what some industry players are saying about the Starz deal:

1) From a recent article in the NY Times:

The relationship between Netflix and the media companies will most likely change drastically, beginning next year when a deal between the company and Starz, the pay-TV channel, to stream movies from Sony and Disney expires.

The original deal from 2008, in which Netflix paid an estimated $25 million annually - a paltry sum, executives say, compared with the hundreds of millions of dollars cable and satellite companies pay Starz for the same movies - is now seen as a major coup for Netflix, and a major mistake by Starz.

Michael Nathanson, a media analyst at Nomura, called it "probably one of the dumbest deals ever. Starz gave up valuable content for tens of millions of dollars."

Mr. Bewkes said that deal, which gave Netflix significant momentum into the new world of online video, potentially undermined the business model of cable television, based on the subscription fees that have steadily flowed even as other media businesses have suffered in the digital age. "Why should anyone subscribe to Starz when they can basically get the whole thing for about nothing?" he said. "That doesn't make much sense."

2) From a recent Reuters article:

"The deal Starz did to give those movies away for $30 million obviously makes no sense. There's a day coming shortly when that deal expires. How do Starz and Netflix address the next deal?" News Corp Chief Operating Officer Chase Carey said this week at the Reuters Global Media Summit.

... Pay TV operators, which spend heavily on studio fees, are also pressuring studios that offer cut rates for distribution on Netflix.

"Their deal with Netflix absolutely does affect our relationship," said an executive of one of Starz's largest pay TV partners, who asked not to be named because the source was not authorized to speak on behalf of the company.

"You can't sell your product to one distributor for pennies on the dollar and then expect other distributors to pay you dollars for your product."

All of these factors that led to Netflix getting a sweetheart deal are now gone - Starz, Disney and Sony have woken up to the value of their content and the threat that Netflix poses - so Netflix will either have to pay up or lose the Starz content when the contract expires in 10 months. Negotiations are underway, and Netflix (of course) says that it doesn't need the Starz content. But we think it does - and will have to pay many multiples of the current licensing fees. We see no reason why Netflix won't have to pay Starz at least the $200 million annually that it's paying Epix.

Postage and Fulfillment Savings

Ah, but what about the savings on postage and fulfillment costs due to fewer subscribers having DVDs mailed to them? In Netflix's latest 10-Q (page 21), it disclosed that there was "a 24% decline in monthly DVD rentals per average paying subscriber attributed to the growing popularity of our lower priced plans and growth in streaming." This decline translates into big savings - but not nearly enough to offset the additional costs of streaming content according to our estimates.

Here's our math:

Netflix breaks down its cost of revenues into two categories:

1) Cost of Subscription, which consists of: a) "content delivery costs related to shipping DVDs"; b) "providing streaming content to subscribers"; and c) "expenses related to the acquisition and licensing of content"; and

2) Fulfillment expenses, which consist of: a) "content processing including operating and staffing our shipping centers"; b) "receiving, encoding, inspecting and warehousing our content library"; and c) "operating and staffing our customer service centers and credit card fees."

The costs that are most impacted by the 24% decline in DVD rentals are 1a) ("content delivery costs related to shipping DVDs") plus all fulfillment expenses. Netflix doesn't disclose a breakdown of 1a), 1b) and 1c), but the latter two are amortized and, as such, appear in the cash flow statement under "Amortization of content library." By subtracting this, we can get a rough estimate of 1a) and then add fulfillment expenses.

Then, we can calculate this cost on a per-subscriber basis and see how much it's declined over the past year. The answer: 15%, as shown in this table:

Impact on Margins

If we apply $150-250 million of savings to the range of incremental costs for streaming content ($420-625 million per year, discussed above), it results in Netflix's costs rising by $170-475 million per year, or $42-119 million per quarter.

That's a very wide range, but even the low end, $42 million, is 64% of Netflix's $65.4 million of pre-tax profit last quarter, and the mid-point, $80.5 million, would more than wipe out all of Netflix's Q3 profit.

But this is a forward-looking estimate, based in part on a higher amount we expect that Netflix will have to pay Starz, so let's use the $90 million of pre-tax profits per quarter that analysts are projecting for 2011. In this case, even the low end of our incremental cost estimate cuts Netflix's pre-tax profits nearly in half, and the mid-point cuts profits by 90%.

Our belief that the increased costs of streaming content will negatively impact Netflix's margins isn't just a theory. Last quarter, strong evidence emerged to support our view: in Q3, Netflix's operating margin was 12.6% and net margin was 6.9%, down from 14.9% and 8.4%, respectively, in Q2. That's a huge decline in only three months. The result was a 12.5% sequential decline in earnings from $0.80 in Q2 to $0.70 in Q3. Again, this is not consistent with a stock trading at nearly 70x earnings.

An In-Depth Analysis of the Cash Flow Statement - and the Likely Impact on Margins

The real cash cost of Netflix's streaming deals can be seen in its Q3 cash flow statement: "Acquisition of streaming content library" was a cash outflow of $115.1 million, up 74.1% from the previous quarter's $66.2 million and up 11.5x year-over-year (from $10 million).

However, this enormous increase in cash paid to bolster its streaming library didn't result in the increase in "Amortization of content library" (which also includes DVD content) that we would have expected: this was $77.1 million in Q3, up a mere 16.6% from the previous quarter's $65.1 million and 36.1% year over year (from $56.7 million).

This chart shows certain key elements of Netflix's cash flow statement each quarter going back to the beginning of 2007:

Saturation

Another risk factor we see for Netflix is that the company is much closer to saturating its market than is commonly believed. The bulls argue that the company's 16.9 million customers represent fewer than 15% of the 115 million households in the U.S., but the company's churn data presents a different picture.

We have analyzed the last decade of Netflix's quarterly statements, in which the company discloses customer additions and cancellations, and calculated that Netflix has had approximately 30 million customer cancellations. In other words, the company has had to add approximately 47 million customers - more than 40% of U.S. households - to be left with today's 16.9 million customers (and many of these will cancel in the future; the churn rate last quarter was 3.8%).

If history is any guide (we think it is), Netflix will need to somehow find another 47 million subscribers for the company to double its current subscriber count (a common medium-term objective in many analysts' view). We don't think that many potential additions exist.

Internet Bandwidth

Another major threat to Netflix is internet providers starting to charge for high usage rather than offering unlimited downloading for a flat rate. It goes without saying that streaming video is very bandwidth intensive and, as noted earlier, Netflix may account for as much as 20% of all internet traffic during a typical evening. Such high usage by Netflix's customers is slowing down the internet for everyone and is one of the reasons why Cisco predicts that internet traffic will triple by 2014. To accommodate this, carriers like AT&T and Comcast will have to invest billions of dollars - and will of course look for a return on this investment, most likely by shifting to a pay-for-usage model that would make Netflix's streaming content much more expensive.

This Business Week article nicely captures what's happening:

While few experts expect carriers to stop investing in new capacity, there's widespread agreement that a financial crunch is coming.

Sanford C. Bernstein analyst Craig Moffett has studied the issue from the perspective of the wireless carriers. As traffic soars, he expects the revenue per megabit to fall from 43 cents today to just 2 cents in 2014. That means a far lower return on investment, a key measure for telecom companies.

"The carriers are faced with an incredible deflationary spiral," Moffett said.

The tussle between Comcast and Level 3 Communications shows how the issue can become electric.

Level 3, which operates backbone networks that quickly ship bits between cities, recently struck a deal with Netflix to help speed delivery of its streaming videos. The result was a sudden surge in Level 3's traffic, which eventually goes through Comcast's cables to reach subscribers.

On Monday, Level 3 accused Comcast of charging exorbitant rates to carry the additional traffic. Comcast shot back that it had no obligation to bear the load for free.

The exchange is a sign of the times: Even if the technology is up to the task of shipping huge data packets, no one is sure how to pay for it.

Ultimately, most experts expect that people who are the heaviest data users will have to start paying more, most likely in the form of tiered pricing plans. These are already common in Europe and Asia, but Americans are used to no limits.

The wireless networks have already moved in this direction: In June, AT&T discontinued its $30-a-month unlimited data plan, forcing mobile consumers to choose between an 0.2-GB-per-month plan or a 2-GB-per-month plan. On Wednesday, Federal Communications Commission Chairman Julius Genachowski approved limits for fixed-line networks that carry data to home or businesses, and said carriers should have "meaningful flexibility ... to address the effects of congestion."

Such changes are new enough that the big data senders like Netflix haven't yet adapted to them. But on an otherwise triumphant earnings call on Oct. 20, Hastings did concede that AT&T's data plans might limit demand for watching movies on mobiles devices.

To Bernstein's Moffett, it was a striking admission.

"That was the first time I've heard one of those tech CEOs admit what should be obvious: that you can't simply bet on continued bandwidth availability."

Netflix and others will, of course, complain about "network neutrality," but that's not the issue here because Comcast isn't favoring its own streaming service over Netflix's. The Chairman of the Federal Communications Commission, Julius Genachowski, recently endorsed the "usage-based pricing" idea, so we see little chance that Netflix's argument will prevail.

Legal Risk

As noted earlier, Netflix's core business of renting DVDs to its customers depends on the First Sale Doctrine, which is coming under legal attack by content owners who argue (correctly, in our opinion) that it's inconsistent and unfair. After all, if Netflix is prohibited from renting another company's content over and over again without compensation if the delivery mechanism is the internet, why should this principle be any different if the delivery mechanism is a DVD?

In September, the U.S. Court of Appeals for the Ninth Circuit issued a decision that calls into question the First Sale Doctrine. Though it was a case related to re-selling software, the court observed that the policy implications might affect movies as well.

According to Eric Goldman, an associate professor at Santa Clara University School of Law, "The ruling could potentially have profound implications. Simply by using the right legal terminology, copyright owners can license their works instead of selling them and restrict how anyone, even third parties, use the copyrighted material."

This legal risk isn't a key pillar of our investment thesis, as the case will likely be tied up in courts for years, but this ruling will likely change the negotiations between Netflix and the content providers over the terms of DVD access in a way that isn't favorable to Netflix.

CFO Resignation

Netflix's long-time CFO, Barry McCarthy, resigned last week, citing "a desire to pursue broader executive opportunities outside the company." (This sounds forced and cliched to us.)

We have no insight into what the real story here is, but our experience is that the sudden, unexplained resignation of a CEO or CFO is usually not a good sign, especially when in this case McCarthy was very highly regarded, had served in this capacity since 1999, and led the company's IPO in 2002.

What If We're Wrong? Could Netflix Be the Next Amazon?

In any position, long or short, we always ask ourselves, "What if we're wrong and what would that scenario look like?"

The best bull case we can make for Netflix is that it becomes the next Amazon.com, which today has a market cap of $80 billion and a stock trading at more than 70x trailing EPS. The company has confounded all of its skeptics (and short sellers), who confidently (and wrongly) predicted that numerous competitors, both online and offline, would put it out of business.

Like many millions of others, we are loyal customers of Amazon for two main reasons:

1. A full selection of books and other merchandise, including the latest titles and products; and
2. Low prices, driven in part by low margins (in the first three quarters of the 2010 fiscal year, Amazon's operating margin was 4.4% and its net margin was 3.5%).

Also, Amazon is able to take advantage of the existing delivery infrastructure (U.S. Postal Service, UPS, FedEx (FDX), etc.).

Netflix's old business was highly successful for similar reasons: customers could access a full selection of movies at an excellent price, and Netflix could piggyback on the existing delivery infrastructure.

But Netflix's new streaming business doesn't have the same advantages. While $7.99/month for unlimited streaming is an excellent price, the selection is very weak and Netflix may soon encounter obstacles to unlimited usage of the internet, as we discussed earlier.

Conclusion

We don't think there are any easy answers for Netflix. It is already having to pay much more for streaming content and may soon have to pay for bandwidth usage as well, which will result in both margin compression (Netflix's margins are currently double Amazon's) and also increased prices to its customers, which will slow growth.

Under this scenario, Netflix will continue to be a profitable and growing company, but not nearly profitable and rapidly growing enough to justify today's stock price, which is why we believe it will fall dramatically over the next year.

Disclosure: The author is short NFLX.

Disclaimer: This article is for informational and educational purposes only and shall not be construed to constitute investment advice. Nothing contained herein shall constitute a solicitation, recommendation or endorsement to buy or sell any security or private fund managed by T2 Partners. Such an offer will be made only by an offering memorandum, a copy of which is available to qualifying potential investors upon request. An investment in a private fund is not appropriate or suitable for all investors and involves the risk of loss.

Investment funds managed by T2 Partners own puts and are short the stock of Netflix. They have no obligation to update the information contained herein and may make investment decisions in the future that are inconsistent with the views expressed in this presentation.

We make no representation or warranties as to the accuracy, completeness or timeliness of the information, text, graphics or other items contained in this presentation. We expressly disclaim all liability for errors or omissions in, or the misuse or misinterpretation of, any information contained in this presentation.

Whitney Tilson is the founder and Managing Partner of T2 Partners LLC (www.T2PartnersLLC.com) and the Tilson Mutual Funds (www.tilsonmutualfunds.com). The former manages three value-oriented private investment partnerships, T2 Accredited Fund, Tilson Offshore Fund and T2 Qualified Fund, while the latter is comprised of two value-based mutual funds, Tilson Focus Fund and Tilson Dividend Fund.

Mr. Tilson is also the co-founder, Chairman and co-Editor-in-Chief of Value Investor Insight (www.valueinvestorinsight.com), an investment newsletter, and is the co-founder and Chairman of the Value Investing Congress (www.valueinvestingcongress.com), a biannual investment conference in New York City and Los ...More Angeles.

Mr. Tilson received an MBA with High Distinction from the Harvard Business School, where he was elected a Baker Scholar (top 5% of class), and graduated magna cum laude from Harvard College, with a bachelor's degree in Government. Mr. Tilson lives in Manhattan with his wife and three daughters.