This article is part of a series that provides an ongoing analysis of the changes made to Einhorn's Greenlight Capital US long stock portfolio on a quarterly basis. At the end of Q1 2012, the US long stock holdings of Greenlight Capital stood at $5.54B which is 6% more than the $5.23B of Q4 2011. The number of holdings in this category reduced from 23 to 20; six positions were eliminated and three new ones were added. The significant events during the last three months include:
a) Einhorn's short recommendation on Green Mountain Coffee Roasters Inc (GMCR) worked as predicted - GMCR closed around ~$25 following a sales shortfall in the latest quarter. The stock had traded as high as $115 before Einhorn's October 2011 presentation about his short thesis.
b) In the IRA Sohn conference on May 16, 2012, Einhorn expressed a favorable opinion on Apple (AAPL). He views it as a software company while most others see it as a hardware company. Apple's real value comes from the software ecosystem consisting of the iOS, the app store, iTunes, and iCloud. The high costs of switching away from it make AAPL worthy of a higher multiple. Amazon (AMZN) was not spared - its future was described as a "riddle". Martin Marietta was described as overvalued.
Computer Sciences Corporation (CSC): CSC, a 1.3% stake, was established this quarter when the price-per-share varied between $23.37 and $33.26. Currently it trades in the low-end of that range at ~$25.75. Einhorn is bullish on CSC and several other mid and large-cap technology companies trading at low multiples compared to the overall market. For investors attempting to follow Einhorn, CSC is a good option to consider.
Expedia Inc (EXPE) & Roundy's (RNDY): EXPE, a small 0.6% stake, was established this quarter when the price-per-share varied between $28.63 and $35.44. The stock spiked more than 10% in late-April following positive 2012 guidance. It currently trades at around $41. Roundy's, a small-cap grocer, is a very small 0.1% stake that was established this quarter when the price-per-share varied between $9 and $11.23. The stock currently trades at ~$10. The stake in EXPE and RNDY are too small to indicate a clear bias.
Travelers Companies (TRV) & Yahoo Inc (YHOO): TRV, a substantial 3.5% stake purchased initially in 2009 and nearly doubled in Q1 2011, was reduced by ~80% last quarter and eliminated this quarter. YHOO, a ~1% stake, established in Q4 2011 when the price-per-share varied between $14.42 and $16.29, was also removed. The stock currently trades at around $15.5. These stake eliminations point to a bearish bias.
Energy Partners Limited (EPL), Broadridge Financial Solutions (BR), Omnivision Technologies (OVTI) & Furiex Pharmaceuticals (FURX): These very small stakes (less than 0.3% each) were rejected this quarter. EPL, a 1% stake, and BR, a 0.5% stake, were initiated in 2010 but has since been gradually disposed. The stake reductions of EPL and BR, albeit from a low base, indicate a mild bearish bias. FURX and OVTI were such insignificant stakes that their disposals did not create any ripples.
DST Systems, Inc (DST): DST, a ~1.5% stake first purchased in Q4 2011 when the price-per-share varied between $41.23 and $50.77, was increased by 40% this quarter when the price-per-share varied between $45.52 and $55.55. The stock currently trades at around $52. The significant stake increase signifies a bullish bias.
Marvell Technology Group (MRVL) & Seagate Technology (STX): These are very large 5% and 7% stakes respectively that were incremented marginally this quarter. The bulk of the MRVL stake was acquired in Q3 2011 at an average purchase price of $13.35. The stock currently trades at around $12.75. The greater part of the STX stake was picked up in Q2 2011 at an average purchase price of $16.06. The stock currently trades at over $26. For investors attempting to shadow Einhorn, MRVL is a good stock to consider.
Dell Inc (DELL): Dell, a 3.6% stake established in Q4 2011 at an average purchase price of $15.53 per share, was reduced by around 15% this quarter. The stock currently trades at around $14.75. Given the remaining relatively large stake, this stake reduction does not necessarily indicate a bearish bias. For investors attempting to follow Einhorn, DELL is an option to consider.
General Motors Company (GM): GM, a large 6.9% of the US long-portfolio stake that was aggressively built-up during Q3 2011 and Q4 2011 at an average purchase price ~$25, was reduced by 22% this quarter when the price-per-share varied between $20.27 and $27.34. The stock currently trades at around $21. The reversal this quarter signifies a mild bearish bias.
Barrick Gold Corp (ABX), Market Vectors ETF Jr (GDXJ), Microsoft Corporation (MSFT), and Research in Motion (RIMM): These stakes were decreased by more than a third this quarter. Earlier Einhorn was very bullish on gold but this quarter saw a shift with significant sales of ABX and GDXJ. As a percentage of the total exposure to gold, the sales are on the low side for the very large stake in GDX was left untouched. Einhorn also has a large stake in physical gold. Based on these facts, the GDXJ and ABX sales do not signify a clear bias on gold. MSFT, a large 4.4% of the US long-portfolio stake that was built up over several quarters in 2010 and 2011, was reduced by over 50% this quarter. RIMM, a small 0.4% of the US long-portfolio stake purchased in Q4 2011, was reduced by over 45% this quarter. The significant stake reduction in MSFT and RIMM signal a strong bearish bias.
CBS Corporation (CBS), Carefusion (CFN), Ensco PLC (ESV), HCA Holdings (HCA), Huntington Ingalls (HII), NCR Corp (NCR), and NVR Inc (NVR): These stakes were decreased by less than 25% during the quarter and indicates a bearish bias.
Aspen Insurance Holdings (AHL), CA Inc (CA), Sprint Nextel (S) & Xerox (XRX): These are very minor (less than 10%) stake reductions and as such do not indicate a clear bias. AHL, purchased in Q3 2011 when the price-per-share varied between $22.90 and $27.08, currently trades just below that price. CA purchased in Q4 2011 when the price-per-share varied between $18.99 and $22.46, spiked in Q1 2012 following a surprise large dividend increase - the stock currently yields 4%, at the top-end of the yield-range for technology stocks. Sprint was purchased in 2010 for much higher prices. XRX, a 2.2% of the US long-portfolio stake purchased in Q4 2011 at an average purchase price of $7.61 per share, is currently trading at $7.15.
The spreadsheet below highlights changes to Greenlight's US stock holdings in Q1 2012:
Please visit our Tracking David Einhorn's Greenlight Capital Holdings article series for an idea on how his holdings have progressed over the years and our previous update highlighting the fund's moves during Q4 2011.