Greenlight's Q2 Review: David Einhorn Is Long Apple, Ensco and NCR

by: Market Folly

Dealbreaker posted up hedge fund Greenlight Capital's second quarter 2010 letter and we wanted to highlight the latest portfolio moves from David Einhorn's camp. Year to date for 2010, Greenlight's funds are up 1.6%, 2.2% and 0.8% respectively. Some of Greenlight's portfolio gains as of late can be attributed to its long position in physical gold as well as its short of Moody's (NYSE:MCO). It sounds as though Greenlight will maintain this short position as well, writing

we believe that an eventual, but likely, legal loss will have a significant impact on MCO shares.

While David Einhorn will be presenting investment ideas in October at the upcoming Value Investing Congress), we still get an intermediate update on his current portfolio. The main talking point in the hedge fund's letter is its revelation of various new positions. Firstly, Greenlight revealed it is long Apple (NASDAQ:AAPL) at an average purchase price of $248.09 per share. Greenlight highlights the company's more than $40 per share in cash and thinks that while growth in the next few years will be slower than recent times, the company still has not fully penetrated its various markets. We've highlighted numerous times how AAPL is one of the most popular hedge fund holdings.

Secondly, Greenlight took a new position in African Barrick Gold (London: ABG). The hedge fund likes that it trades "at less than 6x 2010 EBITDA, a 10% free cash flow yield and $200 per ounce of reserves." Einhorn previously talked about this new stake in his Ira Sohn Investment Conference presentation.

Thirdly, Einhorn touches on Greenlight's new stake in Ensco plc (NYSE:ESV). While we revealed Greenlight's ESV stake last week, we now get some color on the hedge fund's thesis. Greenlight points out the company's $7 per share in net cash and tangible book value of $37.50. It feels shares of ESV were unjustly sold off as it was not involved in the oil spill. The hedge fund maintains that the drilling moratorium should not affect the company's long-term potential. Greenlight's average purchase price of Ensco was $39.41.

Lastly, Greenlight Capital purchased a stake in NCR (NYSE:NCR) in the second quarter as the stock sold off due to accounting losses on pension obligations, among other reasons. Einhorn points to NCR's strong cash flow generating business and strong net cash balance sheet position. Greenlight purchased NCR at $13.58 per share and MarketFolly actually revealed this stake back in May when Greenlight acquired it.

In terms of positions the hedge fund sold completely out of, we see that Greenlight has finally exited its short of Allied Capital (NYSE:AFC). Greenlight's commentary next to this position jokingly says, "So much to say we could write a book about it." If you're unfamiliar, David Einhorn did write a book on this very short-selling battle entitled, Fooling Some of the People All of the Time.

Embedded below is the entire second quarter letter from hedge fund Greenlight Capital:

You can download a .pdf copy here.

Greenlight's top five largest disclosed long positions are: CIT Group (NYSE:CIT), Ensco (ESV), gold, Pfizer (NYSE:PFE), and Vodafone Group (NASDAQ:VOD). While shares of Pfizer (PFE) continue to trade lower and lower, Greenlight still owns its stake as it feels the company deserves to be trading at a higher earnings multiple than current levels. Remember that you can hear David Einhorn's newest investment ideas at the upcoming Value Investing Congress where he and other top hedge fund managers will be presenting in October.

Original article