Whitney Tilson: Howard Hughes is Significantly Undervalued

T2 co-manager Whitney Tilson believes Howard Hughes

is significantly undervalued with regard to its book value. In the several minutes Wilson spoke to CNBC on the virtues of the company's upside, HHC shares soared 3 percent. It is not the fact that shares are trading at a discount to book value, says Tilson. The bigger discounting has taken place in the book value itself, which was set when assets were emerging from the bankruptcy is what makes current valuation such an excellent entry point. "Take Sea Side Shreveport for example," notes Tilson. "The asset is currently booked for $3 to $5 million in the company's balance sheet, as it was bought while in distress. Today, its previous owner would not let the property go even for $100 million." And Tilson stresses that there are at least 10 or so properties within the portfolio's 34 that have similar hidden value waiting to be unlocked. On the other hand, Tilson's confidence on Howard Hughes comes due to the fact that over 50% of its stock is owned by insiders. "We would follow the smartest money in the world all day long," he says of Bill Ackman and David Weinreb, chairman and CEO respectively, both with sizable ownership in the stock. "You get a good feeling about the stock when insiders have so much skin in the game," continues Tilson. "Bill Ackman's track record is well known. And CEO Weinreb's involvement with a personal stake in the company is unprecedented," he concludes, refering to Winreb's purchase of outdated, in-the-money options on the stock that he cannot sell for years to come, in lieu of simply being awarded stock options for his coming on board. On Netflix

, once the stock's biggest detractor, Whitney is bullish as well. He sees the stock having a lot of upside potential on yesterday's Apple

iPad release. "iPad's biggest new draw, the screen, spells great opportunity for Netflix," he notes, "Netflix's content is going to look that much better on the sharper screen." "Shares of Netflix were being pressured for a while there, as people were speculating that a Netflix deal to sell content on Apple's iTunes would subject the company to Apple's usual 30% deal terms," Tilson remarked. "But I guarantee you, while there isn't any information yet on the economic terms between the two companies, it is not going to be 30 percent."