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
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 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

The 10 Most Peaceful Countries in the World

5 Big Reasons Communism Failed

The 15 Most Famous Carl Icahn Quotes

10 Scary Animals that are Actually Harmless

The 8 Most Famous Singer-Actors in Entertainment

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!