David Einhorn is one of the superstars of the hedge fund world, not only because of his timely call on Lehman Brothers’ demise but also because of his spectacular track record. Greenlight Capital returned around 21% since 1996 beating the market by double digits. Another spectacular thing several investors don’t know about these results is that Greenlight had net market exposure of around 50%.
David Einhorn’s 2011 performance doesn’t look anything like his track record. He is a value investor and value companies such as Microsoft (MSFT) are underperforming growth stocks which Einhorn is shorting. We believe Einhorn will keep outperforming the market in the long run. That’s why we track his transactions.
During the first quarter Einhorn sold his entire stake in Capitol Federal Financial (CFFN), Flagstar Bancorp (FBC), Health Management Associates (HMA), Health Net (HNT), Potash (POT), Everest Re (RE) and Verigy (VRGY). These stocks lost 4.7% since the end of March, vs. a loss of 2.7% for the SPY. He also reduced his bets on Transatlantic Holdings (TRH), Ensco (ESV), Cardinal Health (CAH) (he sold both his call options and stock holdings), and Carefusion (CFN) by at least 25%. He also reduced his CIT bet by 10%. Here is the summary of Einhorn’s 13F activity:
CompanyName | Ticker | Value | Activity |
CAPITOL FEDERAL FINANCIAL INC |
| Sold Out | |
FLAGSTAR BANCORP INC |
| Sold Out | |
HEALTH MANAGEMENT ASSOCIATES |
| Sold Out | |
HEALTH NET INC |
| Sold Out | |
POTASH CORP SASKATCHEWAN INC |
| Sold Out | |
EVEREST RE GROUP LTD |
| Sold Out | |
VERIGY LTD |
| Sold Out | |
TRANSATLANTIC HOLDINGS INC | 6307 | -89% | |
E N S C O PLC | 254878 | -51% | |
CARDINAL HEALTH INC | 82260 | -50% | |
M I DEVELOPMENTS INC | MIM | 98524 | -40% |
CARDINAL HEALTH CALL OPTIONS | 189289 | -30% | |
CAREFUSION CORP | 282696 | -25% | |
N C R CORP NEW | 193166 | -11% | |
LYONDELLBASELL INDUSTRIES N V | 91879 | -10% | |
C I T GROUP INC NEW | 283507 | -9% | |
FIFTH STREET FINANCE CORP | 28383 | -7% | |
SEMGROUP CORP | 50279 | -7% | |
XEROX CORP | 140868 | -2% | |
APPLE INC | 291827 | 0% | |
B P PLC | 147178 | 0% | |
BROADRIDGE FINANCIAL SOLUTNS | 60129 | 0% | |
EINSTEIN NOAH RESTAURANT GRP | 174741 | 0% | |
EMPLOYERS HOLDINGS INC | 48034 | 0% | |
ENERGY PARTNERS LTD | 31310 | 0% | |
FURIEX PHARMACEUTICALS INC | 8272 | 0% | |
INGRAM MICRO INC | 53444 | 0% | |
M D C HOLDINGS INC | 1783 | 0% | |
MARKET VECTORS E T F TRUST | 213032 | 0% | |
N V R INC | 93744 | 0% | |
REPUBLIC AIRWAYS HOLDINGS INC | 21945 | 0% | |
SPRINT NEXTEL CORP | 259376 | 0% | |
SYMMETRICOM INC | 10482 | 0% | |
ASPEN INSURANCE HOLDINGS LTD | 114099 | 0% | |
PFIZER INC | 506817 | 8% | |
MICROSOFT CORP | 229991 | 18% | |
BECTON DICKINSON & CO | 185641 | 21% | |
TRAVELERS COMPANIES INC | 249710 | 97% | |
BIOFUEL ENERGY CORP | 22278 | 260% | |
BECTON DICKINSON CALL OPTIONS | 2388 | New | |
BEST BUY COMPANY INC | 172319 | New | |
C V S CAREMARK CORP | 112398 | New | |
FIRST SOLAR INC PUT OPTIONS | 46146 | New | |
GENERAL MOTORS CO | 106123 | New | |
HCA HOLDINGS INC | 99408 | New | |
YAHOO INC | 141525 | New | |
AMDOCS LTD | 14580 | New | |
SEAGATE TECHNOLOGY | 47073 | New |
Einhorn made some big bets during the first quarter on Travelers where he nearly doubled his position, Best Buy, Yahoo, CVS Caremark, and General Motors. The decline in Best Buy made it an attractive value play for Einhorn.
General Motors was one of the favorites of hedge funds at the end of 2010 but its performance disappointed many hedge fund managers. There were 54 hedge funds with a cumulative $1.6 billion invested in GM at the end of March. During the first quarter, Bill Ackman sold his General Motors stake entirely. John Griffin’s Blue Ridge, George Soros, David Tepper’s Appaloosa, Roberto Mignone’s Bridger Management, Richard Perry’s Perry Capital, Larry Robbins’ Glenview, Doug Silverman’s Senator Investment Group, Barry Rosenstein’s JANA Partners, Paul Tanico’s Castlerock, Pavel Begun’s 3G Capital and Leon Cooperman’s Omega Advisors were among the several high profile hedge funds with GM positions. David Tepper and George Soros sold almost all of their GM stakes. John Griffin, Larry Robbins, Doug Silverman, Barry Rosenstein, Paul Tanico, and Pavel Begun sold their stakes. David Einhorn didn’t see an opportunity last year but he saw one after GM’s stock price went 10% below its IPO price.
Einhorn also invested $141 million in YHOO believing that YHOO’s stock price doesn’t reflect the value of its Chinese internet assets. He thought by buying Yahoo now at its current price, he is getting China’s equivalent of Paypal for free. Unfortunately Alibaba already gave away Alipay to comply with Chinese regulations. It’s now more likely that Einhorn may trim his holdings in YHOO.
At the end of May Einhorn spoke at the Ira Sohn Conference and suggested investors to buy Dutch insurer Delta Lloyd and Microsoft. Greenlight Capital increased its bet on Microsoft by 18% during the first quarter. Einhorn says Microsoft’s multiple, net of cash, is only 7 times its earnings despite the fact that revenues have grown four times faster at Microsoft than the S&P 500. He also says that EPS has more than doubled at Microsoft while the S&P’s has grown only a few percent. Microsoft has also almost doubled its dividends. (See Einhorn’s detailed analysis of Microsoft and Delta Lloyd here). Jim Simons’ Renaissance, David Tepper’s Appaloosa, Leon Cooperman’s Omega Advisors and Tom Steyer’s Farallon are some of the other hedge funds that are bullish about Microsoft.
We like David Einhorn’s investment style and believe his stock picks will outperform the market averages over the long-term. We also believe that investors can benefit tremendously by imitating Einhorn’s portfolio.
Disclosure: I am long MSFT.
