David Einhorn’s Greenlight Capital sent a letter to investors on Friday. Although his fund is actually underperforming the market this year (through the end of June), Einhorn continues to remain an influential figure.
In the letter, Greenlight gives its take on a number of specific stocks, including Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR), General Motors Company (NYSE:GM), Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and J.C. Penney Company, Inc. (NYSE:JCP).
Einhorn remains a Green Mountain bear
Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) has been a widely hated stock for years. Even today, its current short float remains well over 20%.
But there is perhaps no bigger Green Mountain bear than Einhorn. In October of 2011, he gave a presentation slamming the company, pointing out that it was poised to lose patent protection for its K-Cups in 2012, and arguing that the market for its single-serve brewer was near saturation.
When Einhorn gave that presentation, shares were trading near $100. Within a few months, they collapsed — falling below $20, but Greenlight didn’t cover. Still, the firm does not seem to regret it, writing to investors:
It is becoming clear that GMCR is approaching saturation of the single serve at-home market (brewer sales were down year over year for the first time) and competition is building from unlicensed branded and private label K-Cups (since the September 2012 patent expiration, competitors have already taken about 15% unit share in supermarkets from GMCR and its licensed partners.)
General Motors could should see earnings growth this year
Einhorn first made the case for General Motors Company (NYSE:GM) back in October at the Value Investing Congress. He believed that the company was suffering from long investor memories and government ownership overhang.
Einhorn argued that GM’s pension risks were overblown, and that the company had improved its cost structure and cleaned up its balance sheet. Although its European division remains weak, Einhorn liked GM’s exposure to China — where it is growing faster than the overall industry.
It was a good call — GM shares have soared over 60% since last October. In fact, the auto giant just reported a quarter where it beat expectations on the back of strengthening European demand.
And while it’s been a big winner for the fund, Greenlight isn’t selling yet. In its recent letter the firm says it expects a period of “rapid earnings acceleration to commence later this year.”
Apple shares will recover
It seems that most hedge fund managers have given up on Apple Inc. (NASDAQ:AAPL). Hedge fund legend Julian Robertson, who once characterized Apple Inc. (NASDAQ:AAPL) as “maybe the greatest company in the world,” recently told Bloomberg that he had given up on the company because it believed it was being poorly managed post-Steve Jobs.
But Einhorn hasn’t given up. Apple Inc. (NASDAQ:AAPL) remains one of Greenlight’s largest positions, and the firm expects the iPhone-maker to recover barring “operating results…[heading] off a cliff.”
In the letter, Greenlight seems to blame a faulty consensus, writing:
Early in the quarter, the concern was that AAPL was losing market share to Samsung. When Samsung’s latest Galaxy phone failed to impress, rather than re-assess AAPL’s better competitive position, the consensus story shifted to concerns about market saturation of high end phones. Sometimes, you just can’t win.