Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

David Einhorn’s Huge Secret: Apple Inc (AAPL), Microsoft (MSFT), Seagate

Page 1 of 2

David Einhorn is one of our favorite hedge fund managers. His fund, Greenlight Capital, has returned roughly 20% per year since its inception in 1996. Now, these returns aren’t in the ballpark of Jim Simons circa early nineties, but they’re impressive nonetheless. One of Einhorn’s most redeeming qualities is that he’s open to sharing his top stock picks with investors through keynote speeches and interviews (read our interview with Einhorn).

GREENLIGHT CAPITALInterestingly, his most public stock picks – like those made at the annual Ira Sohn and Value Investing Congress conferences – have displayed a tendency to outperform both the market, and most of the other positions in his portfolio.

At the moment, we won’t go as far back as his bearish predictions about Lehman Brothers made in the summer of 2007, but we’ll take a closer look at his picks over the past two years.

In 2010, Einhorn publically challenged Bruce Berkowitz and his Fairholme fund, disclosing a short position in The St. Joe Company (NYSE:JOE), a Florida-based real estate developer. Berkowitz disagreed and upped his stake in the company by a significant amount. In the time since, shares of JOE underperformed the SPDR S&P 500 (NYSEARCA:SPY) by around 40 percentage points.

One year later, Einhorn presented his bullish thesis for Microsoft Corporation (NASDAQ:MSFT) at the Ira Sohn Conference in May; shares of the tech giant have gained about 16% since then (vs. 10.7% gain for the SPY). In the fall of that same year, Einhorn revealed perhaps his most noteworthy short position: Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR). The stock has lost nearly 60% of its value since his disclosure. At the end of the third quarter Apple Inc. (NASDAQ:AAPL) and Seagate Technology PLC (NASDAQ:STX) are the two largest positions in Greenlight Capital’s 13F portfolio. Einhorn also made some bullish comments about Apple at the 2012 Ira Sohn Conference but the stock lost about 5% since then.

Taking these past successes into consideration, we can see that David Einhorn is a particularly skilled investor whose predictive capabilities outweigh those of most of his peers. This advantage allows him to generate alpha, both on the short side and the long side of his portfolio. Thus, it’s safe to say that Einhorn deserves the above-average hedge fund fees that have helped him to become a billionaire.

So far we’ve presented anecdotal evidence of this, but Greenlight Capital’s 13F filings since 1999 allow us to delve into the details a bit more. We can statistically analyze Einhorn’s long positions to estimate just how much alpha he’s generated on the long side, and whether it makes sense to imitate his stock picks.

David Einhorn’s Huge Secret Is Revealed Through 13F Disclosures

Imitating 13F filings, which most hedge fund managers file with the SEC on a quarterly basis, has some advantages and disadvantages. Unfortunately, these filings disclose holdings at only one point in time, there is a 45-day delay, and we don’t see the hedge funds’ short positions. On the positive side, we don’t have to pay 2% of our assets and 20% of our returns to the fund manager. We also don’t have to worry about other restrictions imposed by hedge funds, or risk investing in potential Ponzi schemes and other illegal activities.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

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 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!