David Einhorn's Greenlight Capital released its Q4 2011 investor letter on January 17th. The fund returned 9.7% for the fourth quarter 2011, and 2.97% for the full-year, successfully beating the SPY's return of 1.9% in 2011. Einhorn's Greenlight Capital has managed to outperform the S&P 500 index for 13 consecutive years (see David Einhorn's portfolio). At this rate, Einhorn will soon catch Bill Miller's record.
Based on Einhorn's Q4 investment letter, Greenlight Capital initiated a new position in Dell (DELL) following Whitney Tilson in the fourth quarter. Einhorn believes that Dell's recent business performance has exceeded its recent stock performance, and he bought Dell at an average price of $15.53.
Several other hedge fund managers were also bullish about Dell. Based on hedge funds' Q3 portfolio filings, Mason Hawkins' Southeastern Asset Management held more than 146 million shares of Dell at the end of the third quarter. Ken Griffin, Cliff Asness, David E. Shaw, and Steven Cohen all held significant amount of Dell shares before the fourth quarter (see billionaire Ken Griffin's top stock picks).
David Einhorn also re-established his Xerox (XRX) position during Q4. Previously, Einhorn had more than 13 million shares of Xerox at the end of March, and the letter indicates the purchase price was about $9.35. Einhorn sold all these shares with a "modest gain" in the second quarter, after the Japanese earthquake. In the fourth quarter, he re-established his Xerox position at $7.61 per share when the stock traded at less than 8 times its EPS. Einhorn believes Xerox will benefit from a significant amount of new multi-year outsourcing contracts which the company signed before the fourth quarter 2011. Also, Xerox expects a $1.0-1.4 billion share repurchase in 2012.
Among other hedge funds we track, Larry Robbins' Glenview Capital had about 23 million shares of Xerox since the end of Q2. Jeffrey Tannenbaum's Fir Tree picked XRX in Q3, initiating a new position of nearly 20 million shares. Clint Carlson, Ken Griffin, and Steven Cohen also had positions in Xerox during Q3.
Over the fourth quarter, Greenlight sold out of its positions in Becton Dickinson (BDX), CVS Caremark Corp (CVS), Employers Holdings (EIG), Travelers (TRV), First Solar (FSLR), and Diamond Foods (DMND). On the long side, Einhorn sold CVS because he wants to reallocate his capital into cheaper stocks. Greenlight had about 3.36 million shares of CVS at the end of September. On the short side, he closed his First Solar short position, which was said to be one of the most profitable shorts in Greenlight Capital's history. Einhorn had about $38 million in FSLR's put option position at the end of September.
As of the end of September, the largest position in David Einhorn's portfolio was Apple Inc. (AAPL) - the holding was worth more than $500 million. Einhorn also doubled his position in Market Vectors ETF Trust (GDX), resulting in a stake valued at more than $400 million position. Einhorn still held large stakes in Microsoft Corp (MSFT), Carefusion Corp (CFN) and General Motors (GM) at the end of the fourth quarter.