David Einhorn Is Bullish About Seagate $STX

Greenlight Capital’s second quarter investor letter is out. David Einhorn built a medium size position in Seagate (STX). Einhorn already had $47 Million in STX at the end of the first quarter. He probably increased his position to the $200-$250 Million range. Eddie Lampert was the largest holder of STX among the 300+ hedge funds we track. Lampert had $114 Million in Seagate. Jonathan Jacobson’s Highfields Capital, Ken Griffin’s Citadel, Clint Carlson’s Carlson Capital, Larry Robbins’ Glenview, and Benjamin Slavet’s Ascend Capital are also among the other holders of STX.

GREENLIGHT CAPITAL David Einhorn

Here is why David Einhorn is bullish about Seagate:

Seagate Technology (STX) is a manufacturer of hard disk drives. Hard disk drives are used in desktop and notebook PCs, external storage devices, enterprise storage, digital video recorders, and other consumer applications. The market is concerned that prospective hard drive unit demand will be weak due to macro weakness, substitution to flash (solid-state) storage, cannibalization of PC sales by tablets, and greater storage efficiency in the cloud. Though we don’t expect unit demand to fall anytime soon, the hard drive companies have flexibility in their business models and should be able to adjust their operations to protect profitability should unit demand decrease. Hard disk drive technology represents the cheapest, highest capacity storage solution in a world where data needs continue to grow exponentially.

STX is currently in the process of acquiring Samsung’s hard drive operations. Western Digital, its leading competitor, is currently in the process of acquiring Hitachi’s hard drive operations. Following these transactions the industry will have 3 rather than 5 major players, which should increase operating stability. STX management has a large equity interest in the company and appears to be focused on shareholder return. STX repurchased $710 million of stock (~10% of shares outstanding) in the last 2 quarters and has $1.6 billion of capacity remaining under the current repurchase authorization. In April, the company also initiated an $0.18 per share quarterly dividend, providing a 4.5% yield. The Partnerships established their position at $16.06 per share. We estimate that STX has at least $3 per share of earnings power. STX shares ended the quarter at $16.16 each.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Largest Pharmaceutical Companies In the World

The 10 Most Expensive Android Apps

The 9 Most Expensive Designer Bags in the World

The 7 Most Expensive Real Estate in the World

The 10 Most Expensive eBay Items Ever Sold

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!