Billionaire David Einhorn is one of the most closely followed hedge fund managers in the financial media- and, sometimes, even in the general news as has been the case with his recent conflict with Apple Inc. (NASDAQ:AAPL) management over the potential issuance of preferred stock and the company’s plans to ban itself from doing so. Einhorn’s Greenlight Capital, as well as many other hedge funds and notable investors, files quarterly 13Fs. We have used these filings to develop investment strategies; for example, the most popular small cap stocks among hedge funds produce an average excess return of 18 percentage points per year (learn more about our small cap strategy). Of course we can also look at Greenlight’s 13F to see what stocks Einhorn and his team have liked recently. Here are their five largest 13F positions by market value as of the end of December 2012:
Greenlight actually increased its stake in Apple Inc. (NASDAQ:AAPL) by 20% during the fourth quarter as the stock price fell, and entered 2013 with a total of 1.3 million shares in its portfolio. A number of hedge funds were actually selling Apple, and so it is no longer the most popular stock among hedge funds (AIG is hedge funds’ new #1). Apple Inc. (NASDAQ:AAPL) now trades at 10 times trailing earnings, clearly value levels, and it is nearing the point where even a small decline in earnings could leave it undervalued. The sell-side is predicting high earnings growth, and even though we are less optimistic we do think the market is setting a very low bar.
The fund reported a position of over 21 million shares in General Motors Company (NYSE:GM). A popular value stock- it’s also one of the top picks among hedge funds- GM carries a trailing P/E of 9. Revenue was up 4% last quarter compared to the fourth quarter of 2011, and the auto market does seem to be strengthening. It could be worth looking at GM compared to other auto manufacturers- Ford Motor Company (NYSE:F) is at about the same pricing and Honda Motor Co Ltd (NYSE:HMC), despite its premium, could be a good buy as well. Warren Buffett was buying shares of GM in Q4 (find Buffett’s favorite stocks).
See three more of Einhorn’s top picks:
Cigna Corporation (NYSE:CI) was another of Einhorn’s top picks as Greenlight owned 8.2 million shares at the end of December. Analyst expectations for 2013 imply a current-year P/E of 8. We would note that Cigna recently made acquisitions that are expected to strengthen its Medicare business, though it is the case that most M&A ends up destroying shareholder value. The stock is up 32% in the last year. Greenlight has been bullish on health insurers in general, and counted Aetna Inc. (NYSE:AET) among its top ten picks as well. Jeffrey Tannenbaum’s Fir Tree was another major investor in Cigna.
Einhorn added to his position in Marvell Technology Group Ltd. (NASDAQ:MRVL), a $5.3 billion market cap semiconductor developer. Greenlight is doubling down here, as Marvell- where the hedge fund has had a significant position for some time- has fallen 35% in the last year. That percentage decline about matches the fall in earnings which the company reported in its most recent fiscal quarter compared to the same period in the previous fiscal year. Renaissance Technologies, founded by billionaire Jim Simons, owned 6.7 million shares of Marvell at the end of the fourth quarter (check out Renaissance’s stock picks).
Greenlight had 7.7 million shares of Computer Sciences Corporation (NYSE:CSC) in its portfolio according to the 13F, making the $7.3 billion market cap IT services company its fifth largest position by market value. Glenview Capital, managed by Larry Robbins, sold a small number of shares but still reporting owning 4.2 million at the beginning of January (research more stocks Glenview owned). The stock trades at 14 times earnings, whether we consider trailing numbers or forward estimates, and so Computer Sciences might be worth considering as a value stock.
Disclosure: I own no shares of any stocks mentioned in this article.