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There is much to look at with Greenlight Capital. In 2012, the hedge fund lost 7.9% after dropping 4.9% in the fourth quarter of last year. Since inception in May 1996, David Einhorn’s hedge fund returned 1,829%. After fees and expenses, that works out to 19.4% annualized.
There are a number of investing ideas too look at from Einhorn’s fund, both on the long side and on the short side. [See also:
5 Buy and 2 Sell Ideas for Fools]
A Short-Selling Idea1. Green Mountain Coffee Roasters (GMCR) was a bearish bet that did not work out, so far. The stock rallied from the teens in August 2012 and traded at around $46 recently. The 74% advance was responsible for wiping all of Einhorn’s gains for 2012 on that bearish play. A
Starbucks (SBUX) quarterly earnings report mentioned sales of 175 million K-cups in that period. This is nearly double the number sold last year in a two month period. Green Mountain also has a lower valuation than that of Starbucks. Its forward P/E is 15, while Starbucks is valued at a P/E of 21.7.
Bullish Ideas2. General Motors (GM) performed well for Greenlight, as the fund bought 11% of its shares from the government. Greenlight points to the excess capital in the company, and opportunities of share repurchases as reasons to remain bullish.
3. Marvell Technology (MRVL) stood to be a losing position for Greenlight. Very recently, the company was handed a verdict of more than $1 billion for patent infringement.
Marvell shares appear to be on the rebound. The stock bottomed at $7 in late-December, and traded recently above $9. Greenlight believes that the company will be able to reduce or eliminate the penalty from the verdict. Valuation is not the only reason to be like the company: Greenlight likes the large product transition that is taking place. 2013 is very likely the year shares reverse direction and move in a positive direction.
4. Computer Sciences Corp. (CSC) provided a positive return for Greenlight Capital. Shares were acquired at an average price of $27.78, and traded recently above $40. The company has a sound business, but margins are below the industry average. This implies management could perform better, as could the company. Greenlight thinks the company could generate $4.00 in earnings per share.
Additional Comments: Marvell
Marvell is already trading above some analyst targets. The company could reverse direction as it finds a CFO. Weak PC demand is already priced in Marvell’s shares. Strong results from hard drive makers like
Western Digital (WDC) and
Seagate (STX) suggest that Marvell will still grow as demand for storage continues. The TD-SCDMA space could be a weak spot for Marvell, but demand for these types of devices were strong in places like China. China Mobile recently
said that 60 million TD-SCDMA devices were sold in 2012. In December, over 7 million units were sold.
Marvell is the most interesting play because a reduced payment from the patent infringement suit would provide a lift in the short-term.