By Eric Winter
Billionaire David Einhorn is a standout fund manager, providing his investors with annualized net returns of 20% since starting his fund, Greenlight Capital, in 1996. Einhorn searches for investments by seeking value first and foremost, working with a small team to analyze and model potential investments. This type of analysis has proved to beat the market by impressive amounts in some cases, which is why we heed the research and eventual stock picks of excellent managers like Einhorn.
We have found, for example, that the most popular small cap stocks among hedge funds outperformed the market by 18 percentage points even though we started measuring the returns a couple of weeks after 13Fs have been made public (check out the details here). It can also be productive to treat individual 13Fs as free recommendations from fund managers- not necessarily to be followed, but to be considered briefly and then researched further if it seems appealing. We've pored over Greenlight's recently released Q4 13F to see which stocks were lucky enough to get a monetary nod from this esteemed manager.
Einhorn is known to have a tech-heavy portfolio, and his new additions are rightfully indicative of that. Although Apple, Inc, (AAPL) is no stranger to Greenlight's portfolio, Einhorn saw fit to add a call option position to compliment his number one holding. Previous 13F filings show that Einhorn has been scaling out of his $700mm AAPL cash position; this might have frightened some of the bulls who have joined the manager going long. However, by devoting 2.3% of Greenlight's $6.4 billion assets to these new Apple calls, Einhorn shows that he still has upward hopes for the stock, albeit in a slightly more speculative fashion. Considering the drop in share value that the company has experienced so far this year, Einhorn might have made the right choice by moving slightly from equities to derivatives, depending on his strike price and exercise date. Much has been said about Apple possibly losing the reins on its control of the handheld devices marketplace; we think Greenlight saw the writing on the wall and traded accordingly.
The ubiquitous tech giant Google (GOOG) made an appearance on Einhorn's roster last quarter, despite being a longer-term favorite amongst fund managers like billionaires Ken Griffin and Chase Coleman (see how Coleman's top five picks compare to Greenlight's here). The $260bn company managed to post impressive gains nearing the 30% mark in the past twelve months, all while exhibiting growth in earnings and revenue year over year. Although sell-side analysts are largely bullish for the long-term, GOOG has received a number of downgrades since the start of this month alone, including a straight drop to sell from buy by Oracle Investment Research. The stock is trading right up against its 52-week highs currently, with a little more room to grow according to future valuations for a year out.
American Depository Receipt Vodafone Group Plc (VOD) saw a (relatively) small commitment from Einhorn, amounting to less than 0.7% of the firm's billions. The world's second-largest mobile telecommunications company made a number of expansion pushes in 2012, increasing its geographic presence in Europe, Africa, and the U.S. with purchases like Cellular One, Telespectrum-DJ, and TelstraClear Limited. VOD recently posted disappointing revenues at the start of this month, but analysts are hoping that the company's foray into emerging markets in 2013 will combat the weak subscription and macroeconomic woes that caused a decline in growth this past quarter versus a year prior. Paul Tudor Jones recently pushed his own investment down to 300,000 shares.
Comprising 0.4% of Greenlight's capital, Western Digital Corp. (WDC) sits amongst the other tech names on our list. Western Digital joins Seagate Technology as a digital storage play for Einhorn, who boasts a half-a-billion dollar position in the latter. WCD recently posted its latest earnings on the twenty-fourth of last month, and although the company handed out a major beat compared to Wall Street's expectations, they provided cautious guidance going into the rest of next quarter, citing a slower economy and decreased demand in the PC space. Billionaire David Harding of Winton Capital Management remains bullish with his $13.4mm investment.