Tracking David Einhorn's Portfolio - Q2 2018 Update

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Includes: AABA, AAPL, ADNT, AER, AGO, ANF, ATHN, AZO, BBY, BHF, BLMN, CCR, CEIX, CLPR, CNDT, CNX, DDS, DG, DLTR, DSW, ESV, FIVE, GLRE, GM, GPS, GRBK, HUN, IAC, MDCO, MET, MU, MYL, ODP, PRGO, PYPL, ROKU, SFM, T, TJX, TPR, TPX, TSLA, TWTR, TWX, URBN, VNTR, VOYA, XELA, XRX
by: John Vincent
Summary

David Einhorn's 13F stock portfolio value decreased from $3.99B to $3.14B this quarter.

Greenlight's long/short ratio is at 96% long and 75% short compared to 111% long and 82% short last quarter.

Greenlight decreased Apple and Micron while increasing IAC/Interactive.

This article is part of a series that provides an ongoing analysis of the changes made to David Einhorn's Greenlight Capital 13F portfolio on a quarterly basis. It is based on Einhorn's regulatory 13F Form filed on 08/14/2018. Please visit our Tracking David Einhorn's Greenlight Capital Holdings article series for an idea on his investment philosophy and our previous update for the fund's moves during Q1 2018.

Greenlight Capital's 13F portfolio value stood at $3.14B this quarter. It is down ~21% compared to $3.99B as of last quarter - it decreased/dropped several positions during the quarter. The long/short ratio shifted to the short side: 96% long and 75% short - net exposure at 21% compared to 29% as of Q1 2018. The top five holdings represent ~64% of the 13F portfolio. The number of stakes decreased from 35 to 29.

Einhorn's Q2 2018 letter reported that the fund returned negative 18.3% YTD. This is compared to positive 3.4% for the S&P 500 Index. Extreme outperformance of growth over value is viewed as an anomaly - the Russell 1000 Pure Growth index outperforming its Value counterpart by a whopping 54% over the last eighteen months was quoted as an example. Mean reversion should occur although it is impossible to know when. Greenlight maintains a hefty short book. It has maintained the short exposure to Tesla (NASDAQ:TSLA) while the Netflix (NASDAQ:NFLX) short was covered at a loss. athenahealth (NASDAQ:ATHN) short was covered, but it reentered after the recent spike in the share price.

To learn about David Einhorn and the perils of shorting, check out his "Fooling Some of the People All of the Time, A Long Short (and Now Complete) Story".

Note: In the Sohn Conference in April, Einhorn disclosed they were short Assured Guaranty (AGO).

New Stakes:

Gap Inc. (GPS), Dollar General (DG), TJX Companies (TJX), AutoZone (AZO), Dollar Tree (DLTR), and Best Buy (BBY): These are minutely small (less than ~0.15% of the portfolio each) stakes established this quarter.

Note: Gap and Best Buy are back in the portfolio after a quarter's gap.

Stake Disposals:

Consol Energy (CEIX): CEIX was a 0.85% portfolio position that came about as a result of the coal spinoff from CNX Resources (NYSE:CNX) (one share of the newly issued Consol Energy shares for every 8 shares held). Trading started last November at ~$23 and the stock is now at $42.90. There was a ~50% reduction last quarter at prices between $28 and $38.50 and the disposal this quarter was at prices between $28.50 and $47.50.

Time Warner (TWX): The 1.58% portfolio stake in Time Warner was eliminated this quarter as the AT&T (T) deal for Time Warner closed in June.

Dillard's (DDS) and Five Below (FIVE): These very small (less than ~0.5% of the portfolio each) positions were disposed this quarter. DDS holding period was three years, and it exited with a modest overall profit. FIVE spiked ~40% in early June after posting outstanding results.

Abercrombie & Fitch (ANF), Bloomin' Brands (BLMN), Office Depot (ODP), PayPal Holdings (PYPL), Roku Inc. (ROKU), Sprouts Farmers Market (SFM), Tapestry Inc. (TPR), and Urban Outfitters (URBN): These were minutely small (less than 0.15% of the portfolio each) positions established last quarter but disposed this quarter.

Stake Increases:

Brighthouse Financial (BHF): BHF is a large (top three) ~15% portfolio stake established in Q3 2017 and increased by ~60% in the following quarter at an overall cost-basis of $57.92. The stock is currently below that at $41.51. For investors attempting to follow Greenlight, BHF is a good option to consider for further research. There was a ~5% stake increase this quarter.

Note: BHF is a spinoff of MetLife's (MET) U.S. Retail business (annuities and life insurance) that started trading in July last year.

IAC/InterActiveCorp (IAC): IAC is a 1.59% of the portfolio stake established last quarter at prices between $129 and $165 and increased by ~31% this quarter at prices between $131 and $165. The stock currently trades well above those ranges at ~$197.

Note: IAC had a previous round-trip: a long-term stake from Q1 2013 was disposed in Q2 2017 at substantial gains.

Stake Decreases:

General Motors (GM): GM is Greenlight's largest position at ~27% of the portfolio. The position was established during the first three quarters of 2015 at prices between $28.50 and $39. The three quarters through Q2 2016 had also seen a combined ~22% increase at prices between $27 and $34. The position was more than doubled in Q4 2016 thru the purchase of Calls as the underlying traded between $31 and $38. The stake was almost doubled again in Q1 2017 at prices between $34 and $38.50. The following quarter saw a ~25% reduction (liquidated Calls) as the underlying traded between $32.50 and $35.50. Q3 2017 saw another one-third selling at prices between $34.50 and $40.50 and that was followed with a similar reduction in the following quarter at prices between $40.50 and $46.50. GM currently goes for $36.05. There was a ~13% trimming last quarter and that was followed with a ~6% reduction this quarter.

Note 1: In March 2017, Greenlight proposed GM shares be split into two classes (one with dividend and the other without), but management rejected the plan. In response, Greenlight nominated three members to the board but GM shareholders rejected the proposal and the nominations in June.

Note 2: Greenlight had a previous successful roundtrip with GM: A huge ~10% stake was disposed in Q1 2014 at an average exit price of $35.76 compared to an average entry price of $23.87.

Mylan NV (MYL): MYL is a large (top three) ~8% of the portfolio position established in Q4 2015 at a cost-basis of $45.32. Q2 2016 saw a ~70% increase at prices between $38.50 and $49 and that was followed with another ~30% increase in the following quarter at prices between $38 and $50. Q4 2016 also saw a one-third increase at prices between $34 and $39. Q2 2017 saw another ~23% increase at prices between $36.50 and $40. The stock currently trades at $39.13. There was a ~25% selling last quarter at prices between $38.50 and $47.50 and that was followed with a ~10% trimming this quarter.

AerCap Holdings N.V. (AER): AER is a large (top five) ~7% position. It was established in Q2 2014 at prices between $39 and $48. Q4 2014 through Q3 2015 saw a combined ~270% increase at prices between $36.50 and $48.50. First three quarters of 2016 had also seen another ~70% increase at prices between $25.50 and $42. Q4 2017 saw a ~20% selling at prices between $49.75 and $53 and that was followed with a one-third selling last quarter at prices between $49 and $55. There was another ~38% reduction this quarter at prices between $50.50 and $56. The stock currently trades at $56.97.

Note: Greenlight controls ~2.7% of AerCap Holdings.

Voya Financial (VOYA) previously ING US: The fairly large 4.35% VOYA position was established in Q2 2013 at a cost-basis of $20.29. Last year saw a ~60% combined increase at prices between $24 and $41. The stock currently trades at $50.07. There was a ~4% trimming in Q4 2017 and that was followed with a one-third selling last quarter at prices between $46.50 and $54.50. This quarter saw another ~25% reduction at prices between $47 and $55. Greenlight is harvesting gains.

CNX Resources (CNX) previously Consol Energy: CNX is a 4.32% stake purchased in Q3 2014 and built up over the next several quarters. The three quarters thru Q4 2016 had seen a ~50% combined reduction at prices between $8 and $19. The pattern reversed in Q1 2017: ~50% increase at prices between $12 and $16.50. The stock currently trades at $15.94. There was a ~40% selling last quarter at prices between $11.70 and $17.90 and that was followed with a ~28% reduction this quarter at prices between $14.30 and $17.80. Greenlight controls ~3.6% of CNX Resources.

Note: The prices quoted above are adjusted for the coal spinoff (Consol Energy) in November 2017.

Perrigo plc (PRGO): The 4.31% PRGO position was purchased in Q1 2017 at prices between $66 and $87 and increased by ~50% the following quarter at prices between $66 and $76.50. There was another ~15% stake increase in Q3 2017. The stock is now at $76.51. Last quarter saw a ~20% selling at prices between $80 and $95 and that was followed with a similar reduction this quarter at prices between $73 and $84.

Twitter Inc. (TWTR): The 2.23% TWTR position was purchased in Q4 2017 at an average cost of $21.59. The position saw a ~10% trimming last quarter and a ~36% reduction this quarter at prices between $27.50 and $47. The stock is now at $35.18. Greenlight is harvesting gains.

Adient plc (ADNT): ADNT is a ~1% portfolio stake that saw a ~300% increase in Q3 2017 at prices between $64 and $86. The stock is now at $43.29. There was a roughly one-third selling last quarter at prices between $57.50 and $84. This quarter saw another ~50% reduction at prices between $47.50 and $66.

Conduent Inc. (CNDT): Conduent, the Xerox (NYSE:XRX) spinoff started trading in December 2016 at ~$16 and currently goes for $23.18. The 0.89% position was established in Q1 2017 at prices between $13.25 and $17.25. Q4 2017 saw a ~27% selling at prices between $15.05 and $16.30 and that was followed with a ~10% trimming last quarter. There was a ~60% reduction this quarter at prices between $17.50 and $21.

Note: Conduent's business is identical to Affiliated Computer Services which Xerox had acquired in 2010.

Apple Inc. (AAPL): AAPL is a 0.84% position first purchased in the low-40s price-range in 2010. It has seen several profitable trades over the years. Recent activity follow: Q1 2016 saw a ~30% increase at prices between $93 and $110. The next two quarters had seen a combined ~35% selling at prices between $90 and $116. The pattern reversed again in Q4 2016: ~12% increase at prices between $106 and $118. There was a roughly one-third reduction in Q1 2017 at prices between $116 and $144 and that was followed with a ~45% selling in Q3 2017 at prices between $143 and $164. Last quarter saw another ~70% reduction at prices between $155 and $182 and that was followed with a similar reduction this quarter at prices between $162 and $194. The stock currently trades at $228.

Micron Technology (MU): A fairly large position in MU was purchased over the first three quarters of 2017 at a cost-basis of $29.11. Q4 2017 saw a one-third selling at prices between $39 and $50. This quarter saw the position almost sold out at prices between $46 and $63. The stock is now at $52.52.

Note: In the 2013-15 time frame, Greenlight had a successful roundtrip (mid-teens IRR) on Micron.

Clipper Realty (CLPR), DSW Inc. (DSW), and Venator Materials plc (VNTR): These very small (less than ~1% of the portfolio each) positions saw reductions this quarter.

Note 1: Clipper Realty, the New York focused residential REIT had an IPO in February 2017 at ~$13.50 per share. The stock is currently at $12.20.

Note 2: Venator Materials plc, a spinoff from Huntsman (HUN), started trading in August 2017 at ~$20.50 and currently goes for $12.08.

Kept Steady:

Green Brick Partners (GRBK): The large (top five) 7.54% of the 13F portfolio GRBK stake was acquired as a result of BioFuel Energy's JGBL Builder Finance acquisition and rename transaction. The deal closed (October 2014) with Greenlight owning 49% of the business. David Einhorn was appointed Chairman of the Board following the transaction.

Ensco plc (ESV): ESV is now a 4.63% portfolio position. It was established in Q4 2017 at a cost-basis of $5.72. There was a stake doubling last quarter at prices between $4.34 and $7.43 and the stock is now at $6.84.

Altaba Inc. (AABA) previously Yahoo: The 4.12% AABA stake saw a huge ~120% stake increase in Q1 2016 at prices between $27 and $37. The stock is currently at $69.55. Q4 2017 saw a ~50% reduction at prices between $65.40 and $73 and that was followed with a ~20% selling last quarter at prices between $69 and $80.

Tempur Sealy International (TPX): A very small 0.34% of the portfolio stake in TPX was purchased in Q2 2017. The following quarter saw a whopping 600% increase to a fairly large position at a cost-basis of $56.11. Q4 2017 saw a ~30% selling at prices between $51 and $68 and that was followed with a ~70% reduction last quarter at prices between $44 and $64.50. The stock is at $55.39 and the stake is now very small at ~1% of the portfolio.

Consol Coal Resources LP (CCR), Exela Technologies (XELA), and Medicines Company (MDCO): These positions were kept steady this quarter. Greenlight controls ~35% of CCR. In July 2017, Quinpario Acquisition (a SPAC that had an IPO in January 2015) merged with HOV LLC and Novitex Holdings (financial technology services provider) to form Exela Technologies. Greenlight has a 5.6% ownership stake in Exela.

Per Greenlight's Q2 2018 letter, the top disclosed long positions were Bayer (OTCPK:BAYRY), Brighthouse Financial, CNX Resources, General Motors, and Gold. In addition to partner stakes, the fund also invests the float of Greenlight Capital RE (GLRE).

The spreadsheet below highlights changes to Greenlight's 13F stock holdings in Q2 2018:

David Einhorn - Greenlight Capital - Q2 2018 13F Report

Disclosure: I am/we are long BHF, CNX, GM, MYL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.