5 New Buys From David Einhorn

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 |  Includes: AAPL, BAX, BLK, CBS, CFN, CSCO, F, GM, GOOG, LM, MRVL, MSFT, NWS, S, STM, T, VZ
by: Stock Croc

David Einhorn is the president of the Greenlight Capital hedge fund which currently manages around $4.7 billion in assets. Mr. Einhorn has been an extremely successful investor who has a reputation for successful short selling and making contrarian stock picks. His recent picks include three stocks that are down by more than 25% over the last 52 weeks. This article will examine six of his most recent purchases on a valuation basis to determine if they are buys right now.

Marvell Technology Group Ltd. (NASDAQ:MRVL) MRVL has a market cap of $8.41 billion with a price to earnings ratio of 11.84. The stock has traded in a 52 week range between $11.23 and $22.01. The stock is currently trading around $14. The company reported third quarter revenues for the period ending on October 29th, in the amount of $950 million compared to revenues of $959 million in the third quarter of 2010. Third quarter net income was $195 million compared to $255 million in the third quarter of 2010.

One of MRVL’s competitors is STMicroelectronics NV (NYSE:STM). STM is currently trading around $6 with a market cap of $5.28 billion and a price to earnings ratio of 6.1. STM pays a dividend which yields 5.4% versus MRVL which does not pay a dividend.

Greenlight Capital currently owns 16,640,000 shares of MRVL. Greenlight Capital purchased all 16,640,000 shares of MRVL in the third quarter of 2011. MRVL is a semiconductor company whose products are used in the systems of companies such as Cisco Systems (NASDAQ:CSCO) and Microsoft Corporation (NASDAQ:MSFT) which assist wireless communication providers. The company has increased its earnings in each of the last three years, and in the 2011 fiscal year, it increased its year-over-year revenues by 29% and its net income by 156%. Despite the company’s positive earnings, the stock is down by 29.3% over the last 52 weeks. MRVL has a strong business, which should continue to be profitable. There is no reason to rush into this stock, and I would wait for the stock price to turn up before making a buy. I rate MRVL as a hold.

General Motors Company (NYSE:GM) GM has a market cap of $32.43 billion with a price to earnings ratio of 4.53. The stock has traded in a 52 week range between $19.05 and $39.48. The stock is currently trading around $21. The company reported third quarter revenues of $36.7 billion compared to revenues of $34 billion in the third quarter of 2010. Third quarter net income was $1.7 billion compared to net income of $1.95 billion in the third quarter of 2010.

One of GM’s competitors is the Ford Motor Company (NYSE:F). F is currently trading around $10 with a market cap of $38.34 billion and a price to earnings ratio of 6.05. Neither company pays a dividend.

Greenlight Capital currently owns 14,733,000 shares of GM. Greenlight Capital purchased 11,313,000 of those shares in the third quarter of 2011. GM is one of the largest manufacturers of automobiles in the world. In 2010, the company increased its operating income to $5.1 billion from $-21 billion in 2009. The stock of GM has performed poorly and is down by 38% over the last 52 weeks and 11% over the last month. The company has been profitable in each of the last five quarters, and the stock (price to earnings ratio 4.53/price to book ratio 0.94) is cheap. Mr. Einhorn is known for making contrarian stock picks, and this is one of them. I believe that the stock price of GM is cheap and will eventually turn around. However, I see no reason to jump into this stock right away, and I rate the stock as a hold.

CBS Corporation (NYSE:CBS) CBS has a market cap of $15.34 billion with a price to earnings ratio of 13.33. The stock has traded in a 52 week range between $15.99 and $29.68. The stock is currently trading around $23. The company reported third quarter revenues of $3.36 billion compared to revenues of $3.29 billion in the third quarter of 2010. Third quarter net income was $338 million compared to net income of $317 million in the third quarter of 2010.

One of CBS’s competitors is News Corporation (NASDAQ:NWS). NWS is currently trading around $16 with a market cap of $41.09 billion and a price to earnings ratio of 16. The stock has traded in a 52 week range between $15.99 and $29.68. NWS pays a dividend which yields 1.1% versus CBS whose dividend yields 1.7%.

Greenlight Capital currently owns 5,000,000 shares of CBS. Greenlight Capital purchased all 5,000,000 of CBS in the third quarter of 2011. CBS has increased its earnings in each of the last two years, and in 2010, it increased its net income by 220%. Investors have responded to the company’s growing earnings and have bid up the stock price by 47.5% over the last 52 weeks. Investors in CBS are looking forward to 2012 when the network could see a significant increase in advertising revenues from politicians campaigning in local, state and the presidential election. The 2012 elections could be a substantial earnings catalyst for a stock that has upward momentum and is still relatively cheap. I rate the stock as a buy.

Apple Inc. (NASDAQ:AAPL) AAPL has a market cap of $341.8 billion with a price to earnings ratio of 13.26. The stock has traded in a 52 week range between $310.50 and $426.70. The stock is currently trading around $367. The company reported fourth quarter revenues for the period ending on September 24th, in the amount of $28.7 billion compared to revenues of $20 billion in the fourth quarter of 2010. Fourth quarter net income was $6.62 billion compared to net income of $4.3 billion in the fourth quarter of 2010.

One of AAPL’s competitors is Google Inc. (NASDAQ:GOOG). GOOG is currently trading around $570 with a market cap of $184.65 billion and a price to earnings ratio of 19.43. Neither stock pays a dividend.

Greenlight Capital current owns 1,313,700 shares of AAPL. Greenlight Capital purchased 236,000 shares of AAPL in the third quarter of 2011. AAPL has done a fabulous job of increasing earnings. The company increased its fiscal year 2011 net income by 85% to $25.9 billion from $14 billion in 2010. AAPL’s year-over-year fourth quarter revenues increased by 43.5%, while its net income increased by 53.9%. AAPL’s earnings growth is primarily due to the success of its smartphones (iPhone) and tablet computer (iPad). Both of these products are industry leaders. The iPhone is carried by most of the large wireless service providers including AT&T (NYSE:T) and Sprint (NYSE:S), and it recently inked a large deal to sell its new 4s iPhones to Verizon (NYSE:VZ) customers. The company will receive stiff competition from Google’s Android based smartphones, but should still remain a market leader. Also, the stock is down by about 11% over the last month, which may have opened up a buying opportunity. I rate AAPL as a buy.

CareFusion Corporation (NYSE:CFN) CFN has a market cap of $5.19 billion with a price to earnings ratio of 19.23. The stock is trading in a 52 week range between $22.01 and $29.97. The stock is currently trading around $23. The company reported third quarter revenues of $844 million compared to revenues of $811 million in the third quarter of 2010. Third quarter net income was $67 million compared to net income of $38 million in the third quarter of 2010.

One of CFN’s competitors was Baxter International (NYSE:BAX). BAX is currently trading around $48 with a market cap of $26.97 billion and a price to earnings ratio of 12.66. BAX pays a dividend which yields 2.8% versus CFN, which does not pay a dividend.

Greenlight Capital currently owns 7,930,700 shares of CFN. Greenlight Capital purchased 3,274,700 shares of CFN in the third quarter of 2011. CFN is a manufacturer of medical instruments. The company’s earnings have been in an upswing, and it increased its year-over-year first quarter revenues by 4% and its net income by 76%. The company’s stock price has been flat, and over the last 52 weeks, it is down by a fraction of 1%. Perhaps Mr. Einhorn is privy to information that is not readily available to the public. However, the company does not pay a dividend, and there does not seem to be any catalyst that would significantly boost its revenues or stock price. I rate the stock as a hold.

Legg Mason Inc. (NYSE:LM) LM has a market cap of $3.24 billion with a price to earnings ratio of 14.12. The stock has traded in a 52 week range between $22.61 and $ 37.82. The stock is currently trading around $23. The company reported second quarter revenues for the period ending on September 30th, in the amount of $625 million compared to revenues of $674 million in the second quarter of 2010. Second quarter net income was $56.6 million compared to net income of $204 million in the second quarter of 2010.

One Of LM’s competitors is Black Rock Inc. (NYSE:BLK). BLK is currently trading around $151 with a market cap of $27.1 billion and a price to earnings ratio of 11.96. BLK pays a dividend which yields 3.5% versus LM whose dividend yields 1.4%.

Greenlight Capital currently owns 2,600,000 shares of LM. Greenlight Capital purchased all 2,600,000 shares of LM in the third quarter of 2011. Legg Mason is an international money management company. The company saw a drop in its revenues and net income in the second quarter. The stock has performed terribly and is down by 30% over the last 52 weeks. The company has turned a profit in each of the last two years, and its 2011 fiscal year net income increased by 24% to $253 million from $204 million in 2010. The stock has been suffering more because of the markets negative sentiment towards financial stocks than because of the company’s performance. Mr. Einhorn has been known to go against the grain and take a chance on stocks that have been out of favor. I believe that he thinks that LM’s intrinsic value exceeds the company’s market value, and with time, the stock price will move up. Mr. Einhorn may be right, but I do not see any reason to invest in this company right now, and I rate the stock as a hold.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.