Hedge Fund Tracking: David Einhorn's Greenlight Capital, Q3 2008

This is the Third Quarter 2008 edition of our ongoing hedge fund tracking series. Before reading this update, make sure you check out the preface to the series we're doing on Hedge Fund 13F's here. We've already covered Timothy Barakett's Atticus Capital,Whitney Tilson's T2 Partners, Peter Thiel's Clarium Capital, Bill Ackman's Pershing Square, Bret Barakett's Tremblant Capital, and John Paulson's Paulson & Co.

Next up, we have David Einhorn's Greenlight Capital. Greenlight is a $6 billion fund ran by David Einhorn and has seen annual returns of over 25%. Greenlight specializes in spin-offs and value investing. Einhorn's name has been popping up in the media a lot over the past year, as he talked about his welldocumented short position in Lehman Brothers (LEHMQ.PK). And, while that position paid off handsomely for him, it barely offset losses he experienced from other positions. Einhorn was -13% for October and is now -26% year-to-date, as noted in our October hedge fund performance numbers post. Einhorn has also recently detailed the saga between his fund and Allied Capital, a company he shorted, in his book Fooling Some of the People All of the Time: A Long Short Story. It gives you an inside perspective as to how Greenlight constructs and researches its investment theses and we highly recommend it.

We track David Einhorn's Greenlight Capital due to its value investing orientation. Greenlight's approach is slightly different than some of the 'Tiger Cub' progeny funds we track. Although both are value oriented, Greenlight approaches things slightly differently by identifying mispricings in the markets and going from there. We've already covered a few other 'Tiger Cub' portfolios in our hedge fund tracking series, including Stephen Mandel's Lone Pine Capital, Lee Ainslie's Maverick Capital, and John Griffin's Blue Ridge Capital, and Andreas Halvorsen's Viking Global. You can also check out Greenlight's second quarter portfolio update here.

The following were Greenlight's long equity, note, and options holdings as of September 30th, 2008 as filed with the SEC.

New Positions (Brand new positions that it initiated in the last quarter):

• EMC Corp (EMC)
• Kinross Gold (KGC)
• Mercer International (MERC) 8.5% Note
• TicketMaster (TKTM)
• Pomeroy IT (PMRY)

Added to (Positions it already owned but added shares to)

• Republic Airways (RJET): Increased position by 80%
• Dr Pepper Snapple (DPS): Increased position by 30%
• Helix Energy (HLX): Increased position by 30%
• Echostar (SATS): Increased position by 9%
• Teradata (TDC): Increased position by 4%

Some Reduced Positions (Positions it sold some shares of - note not all sales listed)

• Ameriprise Financial (AMP): Decreased position by 83%
• MDC Holdings (MDC): Decreased position by 82%
• Target (TGT): Decreased position by 49%
• Mercer International (MERC): Decreased position by 43%
• Guaranty Financial (GFG): Decreased position by 14%

Removed Positions (Positions it sold out of completely)

• Microsoft (MSFT)
• HSBC (HBC) Puts
• Patriot Coal (PCX)
• Covidien (COV)
• Walgreens (WAG)
• Wellpoint (WLP)
• UnitedHealth (UNH)
• Lehman Bros (LEHMQ.PK) Puts
• Verasun Energy (VSE)
• Tyco (TEL)
• Sears (SHLD)

Top 20 Holdings (by % of portfolio)

1. Dr Pepper Snapple (DPS): 17.5% of portfolio
2. Helix Energy (HLX): 15% of portfolio
3. Target (TGT): 12% of portfolio
4. Einstein Noah (BAGL): 7.5% of portfolio
5. MI Developments (MIM): 6.5% of portfolio
6. Health Management (HMA): 6.4% of portfolio
7. URS Corp (URS): 6.4% of portfolio
8. Teradata (TDC): 5% of portfolio
9. Echostar (SATS): 3.5% of portfolio
10. Ameriprise (AMP): 2.9% of portfolio
11. Employers Holdings (EIG): 2.8% of portfolio
12. MDC Holdings (MDC): 2% of portfolio
13. Fifth Street Finance (FSC): 1.6% of portfolio
14. EMC (EMC): 1.5% of portfolio
15. Triple S Mgmt (GTS): 1.3% of portfolio
16. Kinross Gold (KGC): 1.3% of portfolio
17. Republic Airways (RJET): 1.2% of portfolio
18. Dana Holding (DAN): 1.2% of portfolio
19. Mercer International (MERC) 8.5% Note: 0.8% of portfolio
20. Guaranty Financial (GFG): 0.7% of portfolio

Assets from the collective holdings above were $2.7 billion last quarter and were $1.4 billion this quarter. It is interesting to note that Greenlight is yet another fund we've seen sell out of Sears (SHLD). Bill Ackman's Pershing Square recently sold practically all of its SHLD. Additionally, Greenlight is now the second value-oriented fund we've seen in Teradata (TDC). Stephen Mandel's Lone Pine has a sizable position in TDC as well. Please note that we have not detailed every single change to every single position in this update, but we have covered all the major moves. Also, keep in mind that these filings only include long equity, notes, and options holdings and do not reflect the cash or short portions of their portfolio.

Overall, its been one of the worst years ever for hedge funds, therefore, the recent moves they've made in their portfolios become all the more interesting given the way the market has played out.

Comments

[Dan Jacome:]

The insurers - UNH, WLP etc - look odd - was that a long or short? What about a hospital being his 6th biggest position. long or short? hospitals are in dire trouble....

2008 Dec 04 07:37 PM

[Market Folly:]

Dan,

13F filings do not disclose short positions, only long ones, when referring to common shares. The only 'short' positions we would see would be via puts. If that were the case, it would be denoted on the list. So, all above are long equity positions unless otherwise noted.

2008 Dec 04 09:41 PM