It is great to be David Einhorn. When one question on an earnings call can send stocks plummeting, you know you hold the public’s ear. Einhorn has been running Greenlight Capital since he founded the firm in 1996, producing annualized net returns of over 20% since then. There have been a couple tarnishes to Einhorn and Greenlight this year like the fine imposed by British regulators for insider trading, but other than that, recently Einhorn has been floating on Cloud 9, so to speak.
Here are David Einhorn’s top 10 stock picks at the end of March:
|GENERAL MOTORS CO||GM||379,957||-22%|
|MARKET VECTORS E T F TRUST||GDX||360,125||0%|
|MARVELL TECHNOLOGY GROUP LTD||MRVL||288,995||6%|
|DELPHI AUTOMOTIVE PLC||DLPH||252,633||0%|
|E N S C O PLC||ESV||203,377||-24%|
Dispute a rocky quarter for Apple (NASDAQ:AAPL), Einhorn remains positive on the company’s prospects as are we. In particular, we think that the iCloud will be a core part of the company’s strategy moving forward as well as the ability to run native apps. The best part is that there’s no educational component required; most customers don’t realize how seamless the integration is with other AAPL products and just use it. Competitor Google (NASDAQ:GOOG) hasn’t been able to own the entire ecosystem the way AAPL has been able to; its forte still seems to be in search but is coming full force into mobile and other ancillary services. And Microsoft (NASDAQ:MSFT), which Einhorn decreased holdings of during the quarter, continues to struggle to capture users for its mobile platform. The company has been late to the game and playing catch up has been costly. Nonetheless MSFT continues to throw millions of advertising dollars towards its platform. AAPL trades at 10.7x forward earnings, GOOG at 11.5x, and MSFT at 9.6x.
Einhorn also decreased holdings in Dell (NASDAQ:DELL), which has traded down to a YTD low and is bouncing around $12 per share. We like the new paths DELL has been going down such as the $100 million Dell Innovators Credit Fund but growth and profitability on its core businesses are our priority. Hewlett-Packard (NYSE:HPQ) has similarly had trouble stemming a downward slide in share prices though the new product offerings around cloud computing may help. Even with DELL trading at 6.0x forward earnings and HPQ trading at 5.0x forward earnings, we are cautious on both companies in the short-run. Mason Hawkins, Prem Watsa, and Wallace Weitz are among the fund managers who recently trimmed their stakes in Dell. Billionaires Jim Simons and James Dinan initiated new positions in Dell (see Jim Simons’ top picks).
Einhorn’s recent transactions indicate that he is getting less bullish about old tech stocks and more bullish about Apple. His Apple position is twice as big as his Microsoft and Dell positions combined. All of these companies have low forward PE ratios. We think this is a safe way of taking advantage of these cheap stocks. No matter who wins the PC vs. Tablet battle Einhorn will probably come out ahead over the next 2-3 years.