In a letter to its investors, David Einhorn‘s Greenlight Capital disclosed a few main positions that it completely sold out of during the second quarter, three of which we’ll analyze in this article. The companies include CONN’S, Inc. (NASDAQ:CONN), Marvell Technology Group Ltd. (NASDAQ:MRVL), and EMC Corporation (NYSE:EMC). We decided to take a closer look at the money manager’s views on these companies and decipher what the future might hold for them. The second quarter marked another disappointing period for the fund this year, as it depreciated by 1.5%, bringing the total year-to-date slide to 3.3%. In comparison, the S&P 500 has risen by about 1.2% during the same period. Einhorn, a Cornell graduate, is one of the most successful long/short equity fund managers of the past decade. He launched Greenlight Capital in 1996 along with former co-President Jeffrey A. Keswin with a shoe string budget. Today, the fund has about $12.3 billion in regulatory assets under its management.
Greenlight Capital is just one of more than 700 hedge funds that we have in our database, whose equity portfolios we collate quarterly as part of our small-cap strategy. Even though most smaller investors believe that tracking 13F filings is a fruitless endeavor because they are filed with a delay of a maximum of 45 days after the end of a calendar quarter, the results of our research prove that is not the case. To be on the safe side, we used a delay of 60 days in our backtests that involved the 13F filings of funds between 1999 and 2012 and we still managed to gain an annual alpha in the double digits. Moreover, since the official launch of our strategy in August 2012, our small-cap strategy has obtained returns of more than 135%, beating the S&P 500 Total Return Index by greater than 80 percentage points (see the details).
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Coming back to Greenlight’s sell-offs, CONN’S, Inc. (NASDAQ:CONN) occupies the top spot, as the fund held more than 9.8% of the company’s outstanding stock at the end of the March quarter. The holding comprised 3.56 million shares valued at $107.88 million. The fund initiated a position in the $1.46 billion retailer during the first quarter of 2014, believing that a few bad loans were tarnishing the company’s valuation. However, the loan book has been much harder for the company to control than Einhorn expected and the shares slid considerably during the investment period. However, upon the announcement that the company will be selling its loan book, CONN’S, Inc. (NASDAQ:CONN)’s stock recovered, allowing Greenlight to exit at just a small loss. The fund has reservations about the company’s smooth exit from the finance business. Christian Leone‘s Luxor Capital Group held about 7.59 million shares of CONN’S, Inc. (NASDAQ:CONN) valued at $229.71 million at the end of March, making it the largest stockholder of the company within our database.
Although Greenlight has been able to achieve a 15% compounded interest from its investment in Marvell Technology Group Ltd. (NASDAQ:MRVL), the fund didn’t see much upside for the fabless semiconductor provider from here on out, given the sluggish PC market and lack of earnings growth in the company’s core storage and networking business. Although the technology company has fallen short of expectations a number of times during Greenlight’s investment period, recent sentiment from a court ruling in favor of Marvell Technology Group Ltd. (NASDAQ:MRVL) with regards to a patent infringement lawsuit brought by Carnegie Mellon has given the stock an upward push. It just so happens that said lawsuit spurred Greenlight to initiate that position in the company in the first place, following its being beaten down by the verdict in that case in late 2012. Greenlight held about 9.5 million shares of Marvell valued at $133.02 million at the end of the first trimester of 2015. The stake amassed about 1.78% of the company’s outstanding stock. Among the funds that we track, David Shaw‘s D.E Shaw is the largest shareholder of Marvell Technology Group Ltd. (NASDAQ:MRVL), with some 11.76 million shares valued at $172.87 million.
Greenlight has held a position in EMC Corporation (NYSE:EMC) since the fourth quarter of 2013 and the holding amounted to some 4.22 million shares valued at $107.82 million at the end of the first three months of the year. The rationale behind closing the position was the company’s reduced chances for a favorable change in its corporate structure, and a lack of growth in its storage business. Greenlight made a small profit from this investment. Among EMC Corporation (NYSE:EMC)’s investors that we keep track of, Paul Singer’s Elliot Management ranks at the top, owning 33.5 million shares valued at $856.26 million.
Einhorn also covered closing long positions in Nokia Corporation (ADR) (NYSE:NOK), PlayTech, and Altice, and covering (and thus closing) his short position in Intuitive Surgical, Inc. (NASDAQ:ISRG), which is down by 5.94% year-to-date.
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