What's David Einhorn Up To?

by: Charles Lewis Sizemore, CFA

Greenlight Capital's David Einhorn made a splash this week by seeking a seat on the board of troubled solar company SunEdison (SUNE). SunEdison's stock is down nearly 90% since July, though Greenlight has been adding to its position since the beginning of this year, and now owns about 6% of the company.

While SunEdison is getting the headlines right now, I'm more interested in some of Einhorn's other investments. Like a lot of aggressive hedge fund managers, he runs a concentrated long portfolio. So, the movement of a single stock or two can have an outsized impact on his portfolio. And Einhorn - like a lot of value managers, myself included - has taken his lumps over the past year.

At any rate, let's take a look at what Mr. Einhorn has in his portfolio:

Symbol Company Value ($1,000) % of Portfolio % of Company
AAPL Apple Inc. 1,238,368 20.53 0.20
GM General Motors Co. 489,290 8.11 1.05
KORS Michael Kors Holdings Ltd. 297,526 4.93 3.83
CBI Chicago Bridge & Iron Co. 296,714 4.92 7.13
CNX Consol Energy Inc. 290,173 4.81 12.93
AER AerCap Holdings NV 280,854 4.66 3.72
TWX Time Warner Inc. 262,261 4.35 0.48
GRBK Green Brick Partners Inc. 261,204 4.33 49.41
MU Micron Technology Inc. 185,332 3.07 1.19
ACM Aecom 177,974 2.95 4.27
ON ON Semiconductor Corp. 162,673 2.70 4.19
BK Bank of New York Mellon Corp. 156,600 2.60 0.37
VOYA Voya Financial Inc. 141,487 2.35 1.69
SUNE SunEdison Inc. 133,586 2.21 5.87

With the exception of SUNE, which reflects recent buying, the rest of these holdings are as of September 30. We should get updated numbers for the fourth quarter in a little over two weeks. (I should also mention that these are his long positions only; Einhorn also runs a short book, though those positions are not disclosed.)

But as of the most recent numbers we have, two stocks really jump off the page: Apple and General Motors, which make up 21% and 8% of his long portfolio, respectively. [Disclosure: I am long both as well.]

Apple is taking a beating today, after it gave disappointing guidance for the next quarter. Well, let me just say that I would be very surprised to see Einhorn dump the stock on that news. Einhorn is patient enough to see beyond the next quarter, and Apple has been priced as a no-growth company for a long time. AAPL is one of the cheapest large stocks in America, with a price/earnings ratio in the mid-single digits once you strip out its gargantuan cash hoard. Fellow activist investor Carl Icahn, who also holds about 21% of his portfolio in Apple, has said publicly that he estimates the company's value at well over $200 per share. We'll see. But I can say this: Given the low expectations built into the stock price right now, it wouldn't much in the way of good news to send the shares up sharply.

If Apple drifts lower, I'd recommend backing up the truck to buy more.

I'm also bullish on General Motors. China is looking wobbly, and there are valid concerns that last year's banner year for car sales isn't sustainable. But again, like Apple, GM has been priced as a no-growth stock for a long time. And at today's prices, you're picking up a nice 5% dividend.

I don't know when valuation will matter again. The past year has been a nightmare for value investors, and 2016 isn't getting off to a good start either. But by owning cheap stocks throwing off a high and rising dividend, you're at least getting paid to be patient.

This article first appeared on Sizemore Insights as What's David Einhorn Up To?

Disclaimer: This article is for informational purposes only and should not be considered specific investment advice or as a solicitation to buy or sell any securities. Sizemore Capital personnel and clients will often have an interest in the securities mentioned. There is risk in any investment in traded securities, and all Sizemore Capital investment strategies have the possibility of loss. Past performance is no guarantee of future results.

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