This series of articles will be ongoing updates that analyze changes to David Einhorn’s Greenlight Capital US stock portfolio from quarter to quarter. Please check-out our series Tracking David Einhorn’s Greenlight Capital Holdings for an idea on how his holdings have progressed over the years.
Below is a spreadsheet that highlights changes to Einhorn’s US stock holdings in the last quarter:
Greenlight Capital’s US long stock holdings stood at ~$4.67 billion at the end of the quarter, which is flat compared with the second quarter. The fund performed admirably well during the quarter losing just ~1% compared with the 15% loss in S&P 500 (SPY). Einhorn summarized the performance in the quarter by saying “Generally, our longs fell a bit more than the market, but our shorts fell even more and our macro investments helped mitigate the loss from being net long in a declining market.”
The net-long position was altered from a 101-77 long-short ratio as of the end of Q2 2011, to 94-55 as of the end of Q3 2011. Although the size of the portfolio remained unchanged, there was plenty of trading activity in the long portion of the portfolio.
Barrick Gold Corp (ABX) and Market Vectors ETF Jr (GDXJ): ABX is a small ~1.3% position initiated this quarter when the price-per-share varied between $45 and $55. The stock is currently trading at ~$52. Einhorn also initiated a similar position in the Market Vectors Junior Gold ETF (GDXJ) in the quarter. The price-per-share of GDXJ varied between $28 and $39 during the quarter and it is currently trading at ~$31.70. Einhorn remains very bullish on gold although the focus has shifted from physical gold to gold mining companies.
Marvell Technology Group (MRVL) and Compuware Corp (CPWR): MRVL is a large 5% position initiated this quarter when the price-per-share varied between $12 and $15.5. The average purchase price was $13.35 and the stock is currently trading at ~$15. The investment thesis is based around the fact that the shares are cheap as they are trading at around 6x 2012 earnings estimates. The shares are cheap because of a misconception in the market that the company’s technology is becoming obsolete – the system-on-a-chip devices are used in cellphones and hard disk drives. CPWR is a much smaller technology company stake (<0.1%) initiated in the quarter when the price-per-share varied between $7.40 and $10.20. The stock currently trades at $8.62.
CBS Corporation (CBS): CBS is a 2% stake initiated this quarter when the price-per-share varied between $20 and $30. The position was established at an average purchase price of $20.79 and the stock currently trades at around $25. The investment theory involves recognizing that CBS stands to benefit from growing retransmission fees and deals with online video streaming companies that allow monetizing its content library.
Legg Mason (LM): LM is a small 1.4% position initiated this quarter when the price-per-share ranged between $24 and $34. The stock is trading near the lows of the period at $26.10. For investors attempting to follow Einhorn, the current price is a good entry point.
First Solar (FSLR): FSLR is a very small (<1%) stake initiated this quarter when the price-per-share varied between $63 and $132. The stock currently trades at around $45. FSLR is a significant shift for Einhorn as he had previously shorted the shares by purchasing puts in the first quarter of 2011 when the price-per-share varied between $130 and $170. Einhorn successfully played the short-side and is now turning around and playing the long-side as the stock price has plummeted.
Symmetricom Inc (SYMM) and Synaptics (SYNA): SYMM and SYNA are very small positions – combined, they account for only around 0.2% of the portfolio. SYNA has rebounded well from the $22 to $26 range it traded in the quarter but the SYMM price has not changed significantly. As the positions are very small, they do not represent a strong bullish bias.
Pfizer Inc (PFE) and BP PLC (BP): PFE is a large 10% position that was disposed of this quarter. The investment generated a double-digit annualized return during the two years of ownership, as Einhorn’s investment thesis played out well. The fear of reimbursement cuts for branded pharmaceuticals along with concerns about government investigations of the company’s marketing practices were the determining factors that led to the elimination. BP was a 3% position initiated in 2010 that was trimmed in the last quarter and eliminated this quarter. The investment was exited at break-even due to the fear of falling energy prices.
Aeropostale Inc (ARO): ARO was a small 1.4% stake initiated during the last quarter when the share price varied between $17 and $26. The share price in the third quarter varied between $9.5 and $18.5. It is highly likely that Einhorn exited the position at a loss. The current quote is at $16.8.
Amdocs Ltd (DOX): DOX was a very small stake (~0.3%) initiated in the first quarter of 2011. It was trimmed in the 2nd quarter and eliminated this quarter. As the stake was very small, the disposal does not indicate a strong bearish bias.
Apple Inc (AAPL): AAPL is a very large stake (~11%) that was expanded by about 22% in the quarter when the stock price varied between $335 and $415. the stock currently trades at around $390. AAPL was first bought in 2010 at an average purchase price of around $250. Einhorn continues to be very bullish on Apple shares.
Carefusion (CFN): CFN is a large (~7%) stake that was expanded by around 35% in the quarter when the stock price ranged between $22 and $28. The current quote is around $24. The stake was initiated when the company was spun-off from Cardinal Health (CAH) in 2009. The significant stake increase this quarter shows a strong bullish bias. For investors attempting to follow Einhorn, CFN is a good option as it is trading in the range Einhorn could have bought the shares this quarter.
General Motors Company (GM): GM stake was more than tripled during the quarter with the share count increasing from 3.4 million shares to 14.7 million shares. The share price ranged between $20 and $32 during the quarter and the new position was established at an average purchase price of $25.78. The stock currently trades at ~$23.
Einhorn is very bullish on GM and for investors attempting to follow him, the current share price is a great entry point.
Market Vectors ETF (GDX): The GDX stake was doubled during the quarter. Einhorn exchanged some physical gold holdings for this stake recognizing that gold mining stocks are trading at a comparative discount. Einhorn continues to be very bullish on physical gold as that stake is still the biggest holding in Greenlight’s portfolio.
Aspen Insurance Holdings (AHL), HCA Holdings (HCA), Ensco PLC (ESV), Huntington Ingalls Inds Inc (HII), Marathon Oil Corp (MRO), Seagate Technology (STX), and Sprint Nextel (S): These are significant stakes (1% to 5%) that were substantially increased during the quarter. The stake increases indicate a mild bullish bias. As such, for investors attempting to follow Einhorn’s trades, these form good hunting grounds.
Microsoft Corp (MSFT), NCR Corp (NCR), NVR Inc (NVR), Travelers Companies Inc (TRV), Lyondellbasell Industries (LYB), Broadridge Financial Solutions (BR), CVS Caremark Corp (CVS) and Best Buy (BBY): These were relatively minor stake increases during the quarter and as such do not represent a strong bullish bias.
Becton Dickinson (BDX): BDX is a 1% stake that was initiated in 2009 and was increased to a ~4% position by 2010. The stake was increased again by 20% in the first quarter of 2011. The holding was reduced by slightly more than one-third this quarter. The sizable sale indicates a bearish bias.
Employers Holdings Inc (EIG) and Semgroup Corp (SEMG): EIG is a very small 0.3% position that was trimmed by around one-third this quarter. SEMG is also a very small 0.5% position that was trimmed slightly this quarter. As the stakes are very small, the stake sales do not indicate a clear bearish bias.
Disclosure: I am long PFE, BP, GDX, MSFT, BDX.