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With Its Long Book Posting Solid Gains, Here Are Greenlight Capital’s Top Equity Portfolio Changes

David Einhorn‘s Greenlight Capital, one of the biggest and most famous activist hedge funds, is one of the few funds that managed to end 2016 in the green, but failed to beat the returns of the S&P 500. According to its fourth-quarter letter to investors, Greenlight Capital returned 4.5% during the fourth quarter, net of fees and expenses, and ended 2016 with a net return of 8.4%. Despite this weak performance last year, the fund has generated an average annual return net of fees of 16.1% since it was founded in May 1996. An interesting fact that emerged from the fund’s annual letter was that its long positions performed extremely well in 2016, contributing 19.9% to the gross returns.  However, its short book failed to replicate that performance and ended up eating into its profits.

This divergence in the performance of the long and short positions is captured well by Greenlight Capital’s recent 13F filing. According to the filing, Greenlight’s US long equity portfolio was worth $5.82 billion at the end of December, nearly 11% more over the quarter. The fund’s equity portfolio had a quarterly turnover of almost 40% and its top 10 equity holdings amassed 71% of its portfolio value, at the end of December. In this post, we are going to take a closer look at some noteworthy moves that Greenlight made between October and December.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively the most bullish on. Over the past year, this strategy generated returns of 39.7%, topping the 24.1% gain registered by S&P 500 ETFs. Insider Monkey’s enhanced small-cap strategy registered gains of more than 45% over the last 12 months and outperformed SPY by more than 30 percentage points in the last 4.5 years (more details here)

Greenlight Capital

Michael Kors Holdings Ltd (NYSE:KORS)

– Shares Held By Greenlight Capital (as of December 31): 0

– Value of The Holding (as of December 31): 0

Michael Kors Holdings Ltd (NYSE:KORS) was one of Greenlight Capital’s largest holding at the end of September 2016. However, the fund sold its entire stake in the luxury retailer, which had contained 3.07 million shares, during the fourth quarter. In its fourth letter, the fund revealed that it earned an IRR of 20% in its Kors investment when the company’s business stabilized and it decided to repurchase shares, but the investor decided to exit the position after several of Kors’ potential growth drivers and its US business disappointed. Michael Kors Holdings Ltd (NYSE:KORS)’s stock ended the fourth quarter 8% in the red and has lost a further 10.9% so far this year. The company has been struggling to grow its sales for the past several quarters with same store comps declining  at a rapid rate. For its most recent quarter, the company reported mixed numbers and provided a dismal outlook for the coming quarters. The sales revenue of the company during the third quarter saw a 3.2% year-over-year drop to $1.35 billion and the management at Kors doesn’t think this trend will reverse anytime soon. The company now expects fiscal 2017 revenue to be around $4.48 billion, a significant drop from $4.71 billion it reported for the prior fiscal year.

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