Tracking David Einhorn's Portfolio - Q2 2012 Update

by: John Vincent

This article is part of a series that provides an ongoing analysis of the changes made to David Einhorn's Greenlight Capital U.S. long stock portfolio on a quarterly basis. It is based on Einhorn's regulatory 13F Form filed on 08/14/2012. 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 Q1 2012.

At the end of Q2 2012, the U.S. long stock holdings of Greenlight Capital stood at $6.37B, which is ~16% more than the $5.5B of Q1 2012. The number of holdings has also gone up from 37 to 42. The fund added eleven new holdings but disposed of six stocks in the quarter. The top-5 holdings now represent around 38% of the U.S. long portfolio compared with 42% as of Q1 2012. There was significant churn among the top 5 holdings as well with only Apple Inc. (NASDAQ:AAPL) and Seagate Technology (NASDAQ:STX) retaining their spot in the top 5.

New Stakes:

Aetna Inc. (NYSE:AET), Cigna Corporation (NYSE:CI), Coventry Health Care Inc. (CVH), Humana Inc. (NYSE:HUM), Unitedhealth Group (NYSE:UNH), and Wellpoint Inc. (WLP): Einhorn is building a sizable long position in healthcare related companies through the purchase of these new stakes this quarter. Together, these positions add up to over 15% of the U.S. long portfolio. Most of these stocks are trading below the lows Einhorn could have acquired the stock at during Q2 2012. For investors attempting to follow Einhorn, these are good candidates for further research.

Hess Corporation (NYSE:HES), Oaktree Capital Group (NYSE:OAK), and Virgin Media Inc. (NASDAQ:VMED): These are small 1-2% of the long portfolio stake each purchased this quarter. The purchases indicate a mild bullish bias. The stocks are trading well above the lows reached in Q2 2012. Investors attempting to follow Einhorn into these positions will have to wait for better entry points.

Chipotle Mexican Grill (NYSE:CMG) PUT & Genworth Financial Inc. (NYSE:GNW): CMG is a small short position that appears to have paid off already as the stock dropped sharply from the $400 range to below $300 following disappointing results last month. The 13F filings do not indicate the strike prices and expiry dates for long option positions. But, Einhorn's acumen for shorting stocks is very evident with this trade. GNW is a miniscule position purchased this quarter. The insignificantly small stake does not indicate a bias.

Stake Disposals:

CA Inc. (NASDAQ:CA), Dell Inc. (NASDAQ:DELL), and HCA Holdings (NYSE:HCA): These stakes were 1% to 4% of the portfolio each. They were eliminated this quarter. Einhorn realized good gains on CA but accumulated significant losses on DELL. The stake in DELL was purchased in Q4 2011 at an average purchase price of $15.53 and the stock traded well below that price throughout the quarter. The HCA trade was an anomaly as this hospital operator was eliminated while Einhorn was simultaneously building large positions in the same sector. The trades indicate a clear bearish bias toward these businesses.

Market Vectors Junior Gold Miners ETF (NYSEARCA:GDXJ), Research in Motion (RIMM), and Roundy's Inc. (NYSE:RNDY): These are small stakes (less than 1%) eliminated this quarter. Einhorn was very bullish on gold and so the stock elimination in GDXJ indicates a bearish bias toward small-cap stocks in that sector. Roundy's was a very small 0.1% stake established last quarter. The about-turn this quarter signifies a mild bearish bias. The RIMM stake was established in Q4 2011 and was eliminated this quarter. Einhorn exited with losses on this position.

Stake Increases:

General Motors Company (NYSE:GM), Microsoft Corporation (NASDAQ:MSFT), and Seagate Technology : These very large stakes (over 5% of the long portfolio) were increased significantly this quarter. STX was increased last quarter as well. It is currently Einhorn's second-largest position behind Apple. The bulk of the stake was purchased in Q2 2011 at an average purchase price of $16.06. The stock currently trades at over $34 and so Einhorn is sitting on large gains on the position. MSFT and GM stakes were trimmed last quarter. The about-turns this quarter indicate a bullish bias. GM is currently trading near the lows reached in Q2 2012 and so is a good option to consider for further research.

Marvell Technology Group (NASDAQ:MRVL), Sprint Nextel Corporation (NYSE:S), Xerox Corporation (NYSE:XRX), DST SYS INC (NYSE:DST), and Computer Sciences Corporation (NYSE:CSC): These are medium-sized positions (1-4%) increased incrementally this quarter. CSC and S have bounced back significantly from the lows reached in Q2 2012. Einhorn purchased the initial stake in CSC last quarter at prices between $23.37 and $33.26 and the stock currently trades at around $31. The DST stake was first purchased in Q4 2011 at prices between $41.23 and $50.77. The stock currently trades at around $50. MRVL and XRX are trading near the lows reached in Q2 2012. They are also trading below the price-ranges Einhorn acquired the majority of the stakes at - the XRX position was first purchased at around $7.5 and most of the MRVL position was acquired at around $13. They are good stocks to consider for anyone wishing to follow Einhorn's trades.

Barrick Gold Corporation (NYSE:ABX): The ~1% of the U.S. long portfolio ABX position was reduced by around a third last quarter. This bias took a U-turn as the stake was doubled at prices between $35.24 and $44.21 this quarter. The stock currently trades below that range at around $34.5. Einhorn is very bullish on gold and also has large positions in Market Vectors Gold Miners ETF (NYSEARCA:GDX) and physical gold. The stake increase in ABX signifies a clear bullish bias. For investors attempting to follow Einhorn, ABX is a good position to consider.

Stake Decreases:

Apple Inc. : AAPL is Einhorn's largest position accounting for over 13% of the U.S. long portfolio. It is one of Einhorn's biggest winners in recent times with the first purchases made in the high-$200s price-range. The stock was marginally reduced this quarter. But, the large remaining stake indicates a clear bullish bias.

Aspen Insurance Holdings (NYSE:AHL), CareFusion Corporation (NYSE:CFN), CBS Corporation (NYSE:CBS), Delphi Automotive PLC (NYSE:DLPH), Ensco PLC (NYSE:ESV), Huntington Ingalls Industries Inc. (NYSE:HII), Legg Mason Inc. (NYSE:LM), Liberty Media Capital (NASDAQ:LMCA), Market Vectors Gold Miner ETF , and NCR Corporation (NYSE:NCR): These are medium-sized positions (1 to 5% of the U.S. long portfolio) that were reduced this quarter. CFN was reduced by more than half during the quarter indicating a clear bearish bias. The GDX position was trimmed by around 20% but Einhorn also added to his holdings in ABX, a bell-weather gold miner. The other positions were trimmed marginally and so do not indicate a clear bias.

Best Buy (NYSE:BBY), Compuware Corporation (NASDAQ:CPWR), and Expedia Inc. (NASDAQ:EXPE): These are small positions (less than 1% of the U.S. long portfolio) that were reduced this quarter. BBY was a significant 3% stake last quarter and has been drastically cut this quarter. The bulk of the position was established in Q1 2011 at prices between $29.08 and $35.91. The stock traded between $18.02 and $23.64 during this quarter. Einhorn realized losses on this position. CPWR position was reduced by around 75% this quarter. The stake reduction indicates a bearish bias. EXPE stake was established last quarter at prices between $28.63 and $35.44 and was reduced marginally this quarter. The stock has almost doubled from the lows of last quarter and currently trades at around $52.

The rest of the positions were kept steady during the quarter. The BIOF position was held steady but the share count dropped this quarter because of a 1:20 stock-split.

The spreadsheet below highlights changes to Greenlight's U.S. stock holdings in Q2 2012:

Disclosure: I am long MSFT, GDX.