During the second quarter of the year, Mr. Einhorn showed full conviction in his thesis and increased his stake in Micron Technology by 14% to almost 38 million shares. Now let’s look at what Andreas Halvorsen of Viking Global, who was the second-largest shareholder of the company in our database on March 31 with 31.15 million shares, wrote in his first quarter letter to his shareholders:
“Micron, a leading manufacturer of memory semiconductors, was our biggest loser this quarter, costing VGE 0.6% and VLF 0.7%. Having ranked among our top five winners last year, Micron suffered from short-term PC DRAM pricing weakness in the first quarter, caused by a cyclical slowdown in the PC industry. We believe this weakness is temporary and of decreasing importance as industry demand will depend less on PCs and more on the high growth mobile and server end-markets. Our confidence is supported by an improved industry structure that we believe will lead to more stable margins, less volatile earnings, and higher shareholder returns. We initiated our investment in early 2013 on the back of this thesis and continue to believe strong long-term secular demand outweighs any short-term cyclical weakness. Of equal importance, we expect competitors to remain disciplined during this period of temporary weakness. As near-term pricing stabilizes and shareholder returns increase, we expect that investors will recognize the structural improvements in the industry and re-rate Micron from its current price-earnings multiple of 7.5x. We think there is significant upside to Micron’s share price and have chosen to keep it as a top 20 position in our portfolio.”
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Unlike Mr. Einhorn, it seems the more than 30% decline in Micron Technology, Inc. (NASDAQ:MU)’s shares made Mr. Halvorsen seriously question his thesis on the stock, as he ended up selling his entire stake in Micron Technology during the second quarter. Apart from Greenlight Capital, there were several other hedge funds which increased their stakes in the company during the second quarter, including billionaire David E. Shaw‘s firm D.E. Shaw and Cliff Asness‘ AQR Capital Management.
Micron Technology is scheduled to report its 2015 fiscal third quarter earnings for the period ending August 31, on September 23. While analysts expect the company to have a significant drop in its EPS to $0.34 from $0.96 that it reported for the same quarter last year, it will be interesting to see how investors and especially hedge funds react to the company’s earnings because it is one of the few stocks right now in which the investment theses of several large hedge funds are in stark contrast to each other.
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