(Editors' Note: This article covers a micro-cap stock. Please be aware of the risks associated with these stocks.)
This article is part of a series that provides an ongoing analysis of the changes made to David Einhorn's Greenlight Capital U.S. long stock portfolio on a quarterly basis. It is based on Einhorn's regulatory 13F Form filed on 08/14/2013. Please visit our Tracking David Einhorn's Greenlight Capital Holdings article series for an idea on how his holdings have progressed over the years and our previous update highlighting the fund's moves during Q1 2013.
Greenlight Capital's U.S. long portfolio stood at $5.33B this quarter. It is about 18% lower than the ~$6.54B as of last quarter: the long/short ratio shifted significantly to a more defensive stance - 109% long and 63% short as of Q2 2013 compared to 123% long and 77% short as of Q1 2013. The number of holdings went down from 38 to 30. The fund added seven new holdings and sold out of fifteen stocks in the quarter. The top five holdings now represent around 53% of the U.S. long portfolio, up from 46% last quarter and 40% in Q4 2012 - the portfolio have become more concentrated over the last two quarters. The top-five holdings are the same as that of last quarter although the overall allocation increased by seven percentage points.
Amdocs (NASDAQ:DOX): DOX is a small 1.07% of the U.S. long portfolio position established this quarter at prices between $34 and $37. The stock currently trades just outside that range at $38.50.
ING U.S. (NYSE:VOYA): VOYA is a 1.88% of the U.S. long portfolio position established this quarter at an average cost-basis of $20.29. The stock currently trades 50% higher at just over $30. This was a very timely purchase for Einhorn as he took advantage of a classic carve-out situation to establish the position near the IPO price.
Liberty Global Class A & Class C (NASDAQ:LBTYA) (NASDAQ:LBTYK): Liberty Global position accounts for ~3% of the U.S. long portfolio. Einhorn had a position in Virgin Media (NASDAQ:VMED) from Q2 2012 onwards and the Liberty Global position was established as a result of the acquisition of VMED by Liberty Global. The VMED position roughly doubled in around twelve months of ownership.
Rite Aid Corporation (NYSE:RAD), URS Corporation (NYSE:URS), & WPX Energy (NYSE:WPX): RAD, URS, and WPX are ~1% of the U.S. long portfolio position each established this quarter. RAD was purchased at prices between $1.71 and $3 and it trades currently at $3.47. URS was purchased at prices between $43 and $50 and it trades currently at $49.30. WPX was purchased at prices between $15 and $20.50 and it trades currently at $18.42.
Seagate Technology (NASDAQ:STX): The 3% STX stake was finally eliminated this quarter after a pattern of periodic trimming over several quarters. The bulk of the original stake was purchased in Q2 2011 at an average purchase price of $16.06. The stock currently trades at around $41. Einhorn has classified this exit as one of his most profitable ever: 64% compounded annual return over a two-year holding period.
CBS Corporation (NYSE:CBS): CBS was a 2.56% of the U.S. long portfolio stake that was eliminated this quarter at prices between $44.50 and $51.50. His initial stake was at an average purchase price of $20.79 in Q3 2011. The stake was reduced by one-third last quarter at prices between $37 and $47. Here again, Einhorn generated a stunning 77% annualized return over a two-year holding period.
Sprint Nextel Corporation (NYSE:S): S was a 2% of the U.S. long portfolio position that was first purchased in the fall of 2010. The position showed substantial unrealized losses in the interim but ultimately Einhorn showed the patience to hold on. His buy thesis took its time to play out, but finally he still managed to exit the position at a very respectable annualized return of 20%.
Microsoft Corporation (NASDAQ:MSFT): MSFT position was first purchased in 2009. As of last quarter, it was a 2.66% position and was eliminated this quarter at prices between $28.50 and $36. All told, the position realized high-single-digit annualized return over the holding period. Einhorn is bearish on MSFT.
Hess Corporation (NYSE:HES) & Green Mountain Coffee Roasters (NASDAQ:GMCR) PUTS: HES was a 1.36% of the U.S. long portfolio stake established last quarter at prices between $53 and $73. It was eliminated this quarter at prices between $62.50 and $74.50. Einhorn disclosed his short thesis on GMCR in a presentation titled "GAAP-uccino" at the Value Investing Congress in October 2011. The stock traded as high as $115.98 per share before that presentation and dropped as low as $18 in July 2012. The GMCR PUTS purchased last quarter and eliminated this quarter was based on the same thesis. Einhorn has identified the short position on GMCR as a money loser so far.
Symmetricom Inc. (NASDAQ:SYMM), Republic Awys Hldgs Inc. (RJET), National Bank Holdings (NYSE:NBHC), Aecom Technology (NYSE:ACM), Barrick Gold Corporation (NYSE:ABX), Coventry Health Care Inc. (CVH), Tessera Technologies (NASDAQ:TSRA), and Western Digital (NASDAQ:WDC): These are very small positions (less than 1% of the U.S. long portfolio) that were eliminated this quarter. As the position sizes were very small, they do not indicate a clear bias.
Aetna Inc. (NYSE:AET): AET is a top-five position that was increased marginally this quarter to a ~8% stake. The original position was a ~3.2M share stake established in Q2 2012 at prices between $38.50 and $50. It has since been increased to a ~6.7M share stake as of this quarter. The stock currently trades at $63.24. Einhorn is bullish on AET.
Market Vectors Gold Miner ETF (NYSEARCA:GDX): GDX position was increased by ~47% to a 4.04% position this quarter at prices between $37.85 and $46.90. The stock currently trades well below that range at $28.70. Einhorn continues to be bullish on Gold against falling prices. Gold overall (includes a large holding in physical gold) is still listed as a top-five position in Einhorn's long portfolio.
IAC Interactive (IACI): IACI was a minute 0.30% of the U.S. long portfolio position established last quarter. This quarter, the position was substantially increased to a 1.60% position at prices between $43.50 and $51.50. The stock currently trades at around $50. The stake increase represents a clear bullish bias.
Spirit Aerosystems (NYSE:SPR) and Biofuel Energy (NASDAQ:BIOF): These are very small positions (less than 1% of the U.S. long portfolio) that were increased this quarter. As the position sizes are still very small, they do not indicate a clear bias.
Computer Sciences Corporation (NYSE:CSC): Einhorn purchased the initial stake in CSC in Q1 2012 at prices between $23.37 and $33.26. The stake was almost doubled in Q3 2012 at prices between $22.50 and $34.68 and by an additional ~12% in Q4 2012 at prices between $30 and $41. Last quarter saw a turn-around, as the position was reduced by around 23% at prices between $40 and $51 and the pattern continued this quarter with a stake reduction of another 30% at prices between $42.50 and $49.40. The stock currently trades outside that range at $52.20. The large stake reduction spanning several quarters indicates a clear bearish bias.
Delphi Automotive PLC (NYSE:DLPH): DLPH is a 3.17% of the U.S. long portfolio stake that was established in 2011 prior to the IPO. It was reduced by 25% last quarter at prices between $37.50 and $44.50. This quarter, it was reduced again by another 45% at prices between $40.94 and $52.09. It currently trades at over $55. The significant stake reduction indicates a bearish bias.
Cigna Corporation (NYSE:CI): CI is a top-five position that was reduced by ~40% this quarter at prices between $62.50 and $72.50. The original position was established in Q2 2012 at prices between $43 and $50. The stock currently trades at $78. The significant stake reduction of a large position indicates a clear bearish bias.
Marvell Technology Group (NASDAQ:MRVL) & General Motors Company (NYSE:GM): GM and MRVL are top-five positions that were reduced substantially (~15% and ~20% respectively) this quarter. Einhorn is harvesting large gains from these positions.
NCR Corporation (NYSE:NCR): NCR is a 5.72% position that was reduced marginally this quarter. NCR was first purchased in 2010 at much lower prices and Einhorn is harvesting gains.
Aspen Insurance Holdings (NYSE:AHL), Babcock & Wilcox (BWC), Oaktree Capital Group (NYSE:OAK), Legg Mason Inc. (NYSE:LM), & DST SYS INC (NYSE:DST): These are medium-sized positions (1-5%) that were reduced incrementally this quarter. The stake reductions indicate a mild bearish bias.
State Bank Financial (NASDAQ:STBZ) & Vodaphone Group PLC (NASDAQ:VOD): These are very small positions (less than 1% of the U.S. long portfolio) that were trimmed further this quarter. As the position sizes are very small, they do not indicate a clear bias. Vodaphone is listed as a top-five holding in the partnership: although the 13F position is very small, Einhorn probably owns the London listed shares for the rest of the stake.
The rest of the positions were kept steady during the quarter:
Apple Inc. (NASDAQ:AAPL) and CALLs: AAPL is Einhorn's largest position accounting for 17.84% of the U.S. long portfolio. The position was first purchased in the high-200s price-range in 2010. It was reduced by 25% in Q3 2012 at prices between $574.88 and $702.10 but upped by 45% in Q4 2012 at prices between $509 and $671. Last quarter, the position was again increased by around 50% at prices between $420 and $550. The stock currently trades at around $500. The aggressive stake build-up indicates a clear bullish bias.
Oil States International (NYSE:OIS): OIS is a 3.37% of the U.S. long portfolio stake established last quarter at an average purchase price of $77.16. The stock currently trades at around $91. In the Ira Sohn conference in May, Einhorn highlighted this position saying the shares could be worth as high as $155 per share, if the accommodation business it owns is spun-off as an REIT. Also worth noting is the fact that OIS is listed as a top-five position in the partnership. So, in addition to this 13F holding, he probably owns the rest of the stake outside the U.S. (Frankfurt?).
Einstein Noah (NASDAQ:BAGL): BAGL is a very long-term holding that has been kept steady since 2009. It accounts for 2.86% of the U.S. long portfolio. Einhorn is bullish on BAGL.
Capital Bank Financial (NASDAQ:CBF) & Fifth Street Finance (NASDAQ:FSC): These are very small positions (less than 0.5% of the U.S. long portfolio) that were kept steady this quarter. As the position sizes are very small, they do not indicate a clear bias.
The spreadsheet below highlights changes to Greenlight's U.S. stock holdings in Q2 2013:
Disclosure: I am long MRVL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.