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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

CFFN

Sold Out

FLAGSTAR BANCORP INC

FBC

Sold Out

HEALTH MANAGEMENT ASSOCIATES

HMA

Sold Out

HEALTH NET INC

HNT

Sold Out

POTASH CORP SASKATCHEWAN INC

POT

Sold Out

EVEREST RE GROUP LTD

RE

Sold Out

VERIGY LTD

VRGY

Sold Out

TRANSATLANTIC HOLDINGS INC

TRH

6307

-89%

E N S C O PLC

ESV

254878

-51%

CARDINAL HEALTH INC

CAH

82260

-50%

M I DEVELOPMENTS INC

MIM

98524

-40%

CARDINAL HEALTH CALL OPTIONS

CAH

189289

-30%

CAREFUSION CORP

CFN

282696

-25%

N C R CORP NEW

NCR

193166

-11%

LYONDELLBASELL INDUSTRIES N V

LYB

91879

-10%

C I T GROUP INC NEW

CIT

283507

-9%

FIFTH STREET FINANCE CORP

FSC

28383

-7%

SEMGROUP CORP

SEMG

50279

-7%

XEROX CORP

XRX

140868

-2%

APPLE INC

AAPL

291827

0%

B P PLC

BP

147178

0%

BROADRIDGE FINANCIAL SOLUTNS

BR

60129

0%

EINSTEIN NOAH RESTAURANT GRP

BAGL

174741

0%

EMPLOYERS HOLDINGS INC

EIG

48034

0%

ENERGY PARTNERS LTD

EPL

31310

0%

FURIEX PHARMACEUTICALS INC

FURX

8272

0%

INGRAM MICRO INC

IM

53444

0%

M D C HOLDINGS INC

MDC

1783

0%

MARKET VECTORS E T F TRUST

GDX

213032

0%

N V R INC

NVR

93744

0%

REPUBLIC AIRWAYS HOLDINGS INC

RJET

21945

0%

SPRINT NEXTEL CORP

S

259376

0%

SYMMETRICOM INC

SYMM

10482

0%

ASPEN INSURANCE HOLDINGS LTD

AHL

114099

0%

PFIZER INC

PFE

506817

8%

MICROSOFT CORP

MSFT

229991

18%

BECTON DICKINSON & CO

BDX

185641

21%

TRAVELERS COMPANIES INC

TRV

249710

97%

BIOFUEL ENERGY CORP

BIOF

22278

260%

BECTON DICKINSON CALL OPTIONS

BDX

2388

New

BEST BUY COMPANY INC

BBY

172319

New

C V S CAREMARK CORP

CVS

112398

New

FIRST SOLAR INC PUT OPTIONS

FSLR

46146

New

GENERAL MOTORS CO

GM

106123

New

HCA HOLDINGS INC

HCA

99408

New

YAHOO INC

YHOO

141525

New

AMDOCS LTD

DOX

14580

New

SEAGATE TECHNOLOGY

STX

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.

Source: David Einhorn's Favorite Stock Picks