Billionaire David Einhorn is one of the most closely followed hedge fund managers in the financial media and sometimes even in the general news, as has been the case with his recent conflict with Apple (AAPL) management over the potential issuance of preferred stock and the company's plans to ban itself from doing so.
Einhorn's Greenlight Capital, as well as many other hedge funds and notable investors, files quarterly 13Fs. We�ll take a look at Greenlight's 13F to see what stocks Einhorn and his team have liked recently. Here are their five largest 13F positions by market value as of the end of December 2012.
Greenlight actually increased its stake in Apple by 20% during the fourth quarter, as the stock price fell, and entered 2013 with a total of 1.3 million shares in its portfolio. A number of hedge funds were actually selling Apple, and so it is no longer the most popular stock among hedge funds (AIG is hedge funds' new #1).
Apple now trades at 10 times trailing earnings, clearly value levels, and it is nearing the point where even a small decline in earnings could leave it undervalued. The sell-side is predicting high earnings growth, and even though we are less optimistic, we do think the market is setting a very low bar.
The fund reported a position of over 21 million shares in General Motors GM . A popular value stock � it's also one of the top picks among hedge funds � GM carries a trailing P/E of 9. Revenue was up 4% last quarter compared to the fourth quarter of 2011, and the auto market does seem to be strengthening. It could be worth looking at GM compared to other auto manufacturers � Ford F is at about the same pricing and Honda HMC , despite its premium, could be a good buy as well. Warren Buffett was buying shares of GM in the fourth quarter.
Cigna CI was another of Einhorn's top picks, as Greenlight owned 8.2 million shares at the end of December. Analyst expectations for 2013 imply a current-year P/E of 8. We would note that Cigna recently made acquisitions that are expected to strengthen its Medicare business, though it is the case that most M&A ends up destroying shareholder value.
The stock is up 32% in the last year. Greenlight has been bullish on health insurers in general, and counted Aetna AET among its top-ten picks as well. Jeffrey Tannenbaum's Fir Tree was another major investor in Cigna.
Einhorn added to his position in Marvell Technology Group MRVL , a $5.3 billion market cap semiconductor developer. Greenlight is doubling down here, as Marvell � where the hedge fund has had a significant position for some time � has fallen 35% in the last year. That percentage decline about matches the fall in earnings which the company reported in its most recent fiscal quarter compared to the same period in the previous fiscal year. Renaissance Technologies, founded by billionaire Jim Simons, owned 6.7 million shares of Marvell at the end of the fourth quarter.
Greenlight had 7.7 million shares of Computer Sciences Corporation CSC in its portfolio according to the 13F, making the $7.3 billion market cap IT services company its fifth-largest position by market value. Glenview Capital, managed by Larry Robbins, sold a small number of shares but still reporting owning 4.2 million at the beginning of January. The stock trades at 14 times earnings, whether we consider trailing numbers or forward estimates, and so Computer Sciences might be worth considering as a value stock.
This column was written by Matt Doiron.
Disclosure: Ms. Krishnamsetty owns AAPL.
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