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
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 44 percentage points in 21 months Learn how!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

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!