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David Einhorn Spills The Beans On Why He Sold Out Of These Stocks In Q2

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In a letter to its investors, David Einhorn‘s Greenlight Capital disclosed a few main positions that it completely sold out of during the second quarter, three of which we’ll analyze in this article. The companies include CONN’S, Inc. (NASDAQ:CONN), Marvell Technology Group Ltd. (NASDAQ:MRVL), and EMC Corporation (NYSE:EMC). We decided to take a closer look at the money manager’s views on these companies and decipher what the future might hold for them. The second quarter marked another disappointing period for the fund this year, as it depreciated by 1.5%, bringing the total year-to-date slide to 3.3%. In comparison, the S&P 500 has risen by about 1.2% during the same period. Einhorn, a Cornell graduate, is one of the most successful long/short equity fund managers of the past decade. He launched Greenlight Capital in 1996 along with former co-President Jeffrey A. Keswin with a shoe string budget. Today, the fund has about $12.3 billion in regulatory assets under its management.


Greenlight Capital is just one of more than 700 hedge funds that we have in our database, whose equity portfolios we collate quarterly as part of our small-cap strategy. Even though most smaller investors believe that tracking 13F filings is a fruitless endeavor because they are filed with a delay of a maximum of 45 days after the end of a calendar quarter, the results of our research prove that is not the case. To be on the safe side, we used a delay of 60 days in our backtests that involved the 13F filings of funds between 1999 and 2012 and we still managed to gain an annual alpha in the double digits. Moreover, since the official launch of our strategy in August 2012, our small-cap strategy has obtained returns of more than 135%, beating the S&P 500 Total Return Index by greater than 80 percentage points (see the details).

David Einhorn
David Einhorn
Greenlight Capital

Coming back to Greenlight’s sell-offs, CONN’S, Inc. (NASDAQ:CONN) occupies the top spot, as the fund held more than 9.8% of the company’s outstanding stock at the end of the March quarter. The holding comprised 3.56 million shares valued at $107.88 million. The fund initiated a position in the $1.46 billion retailer during the first quarter of 2014, believing that a few bad loans were tarnishing the company’s valuation. However, the loan book has been much harder for the company to control than Einhorn expected and the shares slid considerably during the investment period. However, upon the announcement that the company will be selling its loan book, CONN’S, Inc. (NASDAQ:CONN)’s stock recovered, allowing Greenlight to exit at just a small loss. The fund has reservations about the company’s smooth exit from the finance business. Christian Leone‘s Luxor Capital Group held about 7.59 million shares of CONN’S, Inc. (NASDAQ:CONN) valued at $229.71 million at the end of March, making it the largest stockholder of the company within our database.

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