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Apple Inc. (AAPL), General Motors Company (GM): David Einhorn Is Still Bullish About These 2 Stocks

David Einhorn, a famous hedge fund manager, recently released his letter for the second quarter of 2013. His fund, Greenlight Capital, returned 7.1%, net of fees and expenses in the second quarter. He showed his still-bullish attitude toward Apple Inc. (NASDAQ:AAPL) and General Motors Company (NYSE:GM). Apple has been his largest loser in the quarter, declining from $442.66 per share to $396.53 per share, while General Motors Company (NYSE:GM) climbed up from $27.82 to $33.31 per share. Those two stocks are also two of the biggest positions in his funds. Should we follow him into Apple and General Motors? Let’s take a look.

A high-yield value technology stock

Apple Inc. (AAPL)Apple Inc. (NASDAQ:AAPL) is the classic example of the growth stock turning into the value stock. Previously, the company had been growing like crazy. Its earnings rose from only $69 million, or $0.10 per share, to more than $41.7 billion, or $44.15 per share. Apple did not paid any dividends until 2012, after accumulating big chunks of cash along those years of spectacular growth. Now, Apple has become a value stock with a cheap earnings multiple, strong balance sheet and high potential yield for shareholders via both dividend payments and share buybacks.

Recently, Apple Inc. (NASDAQ:AAPL) took advantage of the low interest rate environment, issuing $17 billion in bonds with the triple-A coupon rate of 0.5% to 3.9%. After the debt issuance, Apple still has quite a strong balance sheet. As of June, it had $123.3 billion in equity, $146.6 billion in cash and investments, and nearly $17 billion in long-term debt.

Looking forward, Apple Inc. (NASDAQ:AAPL) plans to return to shareholders as much as $100 billion over a three-year period in both dividends and share repurchases. Apple is trading at $441 per share, with the total market cap of $413.9 billion. The market values Apple at only 10.5 times its trailing earnings and only 6.3 times its trailing EBITDA (earnings before interest, taxes, depreciation and amortization), with the dividend yield at 2.8%. A total $100 billion cash return implies a 24% total yield to shareholders.

Samsung is much cheaper

Einhorn mentioned that the market was “incredibly bearish” toward Apple Inc. (NASDAQ:AAPL). At the beginning of the second quarter, the investment community worried that Apple had been losing market share to Samsung (NASDAQOTH: SSNLF). According to IDC, Samsung is still the global leader in smartphones, with a 30.4% market share while Apple ranked second with 13.1% market share. However, both Samsung and Apple recognized market share losses in the second quarter of this year. LG Display Co Ltd. (ADR) (NYSE:LPL) and Lenovo have moved forward, gaining market share by 1.4% and 1.6%, respectively.

As mentioned, investors had worried about Apple’s market share loss to Samsung, but now the worry has been shifted to the market saturation of high-end smartphones along with the lower-than-expected sales of the new Galaxy phone.

Samsung is trading at $1,200 per share, with the total market cap of around $157 billion. Samsung is trading at a much lower valuation than Apple, at only slightly less than 3.0 times its trailing EBITDA. Looking forward, Samsung will keep innovating to stay the number-one global smartphone maker. However, it is extremely hard to predict who will be winner in the technology field. I personally still think that Samsung is a good choice for technology investors with such a low EBITDA multiple.

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