Greenlight Capital has become one of the most famous hedge funds in the current financial world. Manager David Einhorn is now a billionaire and has the power to singlehandedly send a stock up or down merely by revealing that he is long or short. At a recent investment conference, a mistaken impression by the audience that he was short General Motors Company (NYSE:GM) caused its price to immediately drop- until it was made clear that Greenlight was actually long GM. Einhorn provided his quick takes on a number of stocks at the Ira Sohn conference in May of this year (see our record of some stocks he did and didn’t like). Here’s how these recommendations have done since then (the S&P 500, for purposes of comparison, is up about 7%):
Einhorn said that he was long Apple Inc. (NASDAQ:AAPL) and for a while this position was doing well. However, the recent correction in the stock has put it slightly down since mid May. We think that Apple currently looks like a good value at 12 times trailing earnings; analyst growth expectations imply that the stock is a screaming buy, and even though we think they might be being too optimistic a trailing P/E of 12 can be justified with even a low growth rate. Greenlight sold about a quarter of its shares in the third quarter of the year but Apple was still the fund’s largest position by market value (check out more of Einhorn’s favorite stocks).
One of the billionaire’s short recommendations was Martin Marietta Materials, Inc. (NYSE:MLM). This stock is up 22% since the Ira Sohn conference, so again Einhorn has actually missed on this pick. Martin Marietta is a $4.2 billion market cap provider of aggregates such as granite and limestone; as a result, it is dependent on activity in construction and public infrastructure. Einhorn had argued that the government would stop stimulating demand for the company’s products, which would undercut a fairly expensive valuation. Read what we think about Martin Marietta right now.