Will John Griffin Send David Einhorn a Box of Chocolates?

BLUE RIDGE CAPITALIt has been almost two years since David Einhorn, manager of the $7.8 Billion Greenlight Capital hedge fund presented his case for shorting The St. Joe Company (NYSE:JOE). During his speech at the Value Investing Conference in October of 2010, Einhorn skewered the company. During the speech, he mocked prices they paid for land, the hiring of a Disney executive and claims about land near Port St. Joe, a town in Northwest Florida. JOE claimed a new airport was to be built nearby, but the facts show that JOE had agreed to compensate Southwest Airlines (NYSE:LUV) for any expenses incurred to move operations there. Einhorn quipped, “To paraphrase [the iconic Wendy’s spokesperson] Clara Peller, “Where’s the beach?” The speech caused shares of JOE to tank, eventually closing 8% lower that day.

Bruce Berkowitz, manager of the $7.5 billion Fairholme mutual fund, who was named the “Fund Manager of the Decade” earlier that January by Morningstar held an enormous position in JOE, over 26.8 million shares equating to 29% of the company at this time. After the fiery presentation by Einhorn, Berkowitz told Reuters’ Aaron Pressman that the lower prices were an opportunity for buyers. Berkowitz said he was so appreciative of the lower prices and wanted to “send him a box of chocolates. This is the kind of advertising you just can’t buy. The company should hold a David Einhorn Memorial Investment Week.”

Of course, it did not quite work out for Mr. Berkowitz. Shares of JOE continued lower, touching $17.04 in the weeks after, 30% below the closing price before the conference. Einhorn had bested the best and became a legend in the industry.

History might repeat as Blue Ridge Capital, the hedge fund firm managed by John Griffin, filed a 13G last month disclosing a large stake in Martin Marietta Materials (NYSE:MLM), the $3.8 billion producer of aggregates for the construction industry. The filing noted ownership of 2.53 million shares, 5.53% of the total outstanding with a current market value of $209.9 million. The filing shows Blue Ridge increased its stake by 36% since the previous quarter.

As if on cue, David Einhorn spoke at the Ira Sohn Conference Foundation’s 17th annual Investment Conference in May. One of the companies he was bearish on and presumably short shares was MLM. He argued that the company benefitted from one-time stimulus spending, a revenue stream that is coming to an end and shares are simply too expensive with a P/E ratio of 35 at the time. Shares of MLM traded down 10% immediately afterwards.

Mr. Einhorn’s other predictions that day have been successful calls. During his presentation he expressed a bullish outlook for Apple, Inc. (NASDAQ:AAPL), a neutral outlook on Amazon.com, Inc. (NASDAQ:AMZN) and was bearish on United States Steel Corp. (NYSE:X), Dick’s Sporting Goods, Inc. (NYSE:DKS) and Facebook, Inc. (NASDAQ:FB). Since the speech, AAPL is up 9.6% and AMZN is down 3%. His bearish calls on X, DKS and FB all yielded at lease some success with shares down 18.5%, 1.5% and 24.5%, respectively.

While Mr. Einhorn raised the concerns many might hold regarding shares of MLM, there is a bullish case to be made. Analysts expect strong double-digit EPS growth over the next two years. An increase of 18% for fiscal 2012 and an increase of 41% for 2013 are the average expectations. The company does pay a dividend, currently yielding 1.9% and has paid the same $0.40 per share quarterly dividend since 2008.

Whether one is bullish on MLM, or views the stock as expensive, it is always notable when two prominent fund managers disagree about a particular stock. It is what makes the market dynamic, successful and more appealing. Although we may not hear many stinging quotes between David Einhorn and John Griffin, it will be fascinating to see who might owe a box of chocolates to whom.

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

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

The 10 Biggest Outlet Malls in USA

The 5 Most Popular Rap Songs of All Time

The 10 Countries that Eat the Most Meat

The10 Most Expensive Countries to Fly To

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!