Founded in 1996 by David Einhorn with an initial capital of $900,000, Greenlight Capital has grown into one of the most famous hedge funds around, currently overseeing more than $8 billion worth of assets. After a tough 2015 that saw the fund’s positions generate a 20% loss driven mainly by the slump in the energy markets, at the end of the 2016 second quarter Greenlight Capital was up by 0.4%, after market swings wiped out most of the 3% gain it registered during the first quarter. As they look to get back to winning ways, Einhorn and his team have made some notable changes to the fund’s equity portfolio. Valued at $5.45 billion at the end of June, the fund’s equity bets were spread across a number of sectors, with an emphasis on consumer discretionary, technology and industrial sectors. Among the most prominent moves, was Greenlight’s U-turn with regard to Macy’s Inc (NYSE:M) and a 16% reduction of its top holding – Apple Inc. (NASDAQ:AAPL).
While there are many metrics that investors can assess in the investment process, hedge fund sentiment is something that is often overlooked. However, hedge funds and other institutional investors allocate significant resources while making their bets and their long-term focus makes them the perfect investors to emulate. This is supported by our research, which determined that following the small-cap stocks that hedge funds are collectively bullish on can help a smaller investor beat the S&P 500 by around 95 basis points per month (see more details here).
Playing It Safely with Apple
David Einhorn has been a fan of Apple Inc. (NASDAQ:AAPL) for a long time, but the recent uncertainty regarding the company’s growth potential have prompted Greenlight Capital to cut its exposure to the stock. According to its latest 13F filing, the fund reduced its stake by 16% to 6.85 million shares worth approximately $655 million at the end of the second quarter. Apple Inc. (NASDAQ:AAPL) stock has registered some major swings so far this year, but Greenlight Capital managed to offset some of the losses incurred by the long positions by actively trading the stock, according to its recent investor letter. Investors are currently gearing up for the launch of the new iPhone 7, hoping the release will provide a boost to the stock. Recent versions of the iconic smartphone have been criticized to lack any substantial innovation, sparking concerns about Apple’s ability to gain an edge in this saturated and highly competitive market. Warren Buffett‘s Berkshire Hathaway, on the other hand, had its stake in Apple Inc. (NASDAQ:AAPL) increased by 55% to 15.2 million shares worth $1.45 billion.
Bullish On Mylan NV
During the second quarter, Einhorn and his team boosted their fund’s investment in Mylan NV (NASDAQ:MYL) by 71%, amassing 4.94 million shares valued at $214 million at the end of June. Greenlight Capital initiated the position during the 2015 fourth quarter as it saw “medium-term upside from a competitor recall, an announced share repurchase, and board review of corporate governance complaints.” Greenlight also said it expects Mylan NV (NASDAQ:MYL) to earn approximately $7 per share in 2018. For the 2016 second quarter, the company posted a profit of $168.4 million or $1.16 per share when adjusted for one-time gains and costs, marginally beating analysts’ projections of $1.15 per share. Revenue rose 8% to $2.56 billion, below estimates of $2.61 billion. Mylan NV (NASDAQ:MYL) has recently completed the acquisition of Swedish drugmaker Meda for $7.2 billion in order to gain presence into a number of emerging markets like Southeast Asia, Russia and the Middle East.
Turn the page to read about three other major moves reported in Greenlight’s recent 13F filing.