For someone who has a sizable short portfolio, David Einhorn did pretty well in 2013. According to the latest numbers from the re-insurer’s website, Greenlight Capital Re, Ltd. (GLRE) was up 19.6% in 2013. The hedge fund closed the year at 124% long and 70% gross short exposure. Most long / short equity funds maintain a far lower short weighting.
Greenlight Capital’s top gainers this year
Another winner in Greenlight’s portfolio was Vodafone Group Plc ADR (VOD), which gained over 57% in 2013.
In a recent interview, Einhorn said that Vodafone is a juicy target for acquisitions and mergers and could become a much bigger company as the telecom industry consolidates. During the year, Vodafone sold its stake in Verizon Communications Inc. (VZ), which was worth $100 billion, while buying Kabel Deutschland, one of Germany’s largest cable operators.
Another holding among the top five is Marvell Technology Group Ltd. (MRVL). This one netted the largest return of all, rising over 100% through the year. Incidently Marvell closed the year on a much brighter note than others, stock rose over 5% today after private equity firm KKR disclosed that it had acquired a 6.8% stake in the Systems-on-a-chip maker. KKR’s holding of 33.6 million shares does not eclipse Greenlight’s stake of 44.3 million shares.
For the month of December, Einhorn was up 0.6%, producing a 6.6% return for the fourth quarter.
Einhorn fights with Apple
Apple Inc. (AAPL), which was the target of Einhorn’s activism earlier this year, is also one of his top holdings. Shares of the iPhone maker rose only 10% this year in spite of the added dose of activism from Carl Icahn more recently. Einhorn filed a suit against Apple in February which sought to block an amendment that Apple was seeking in the shareholder charter. Einhorn urged the company to return some portion of its stockpile of cash to its shareholders through a form of preferred stock. Although the court ruled in favor of Einhorn, the hedge fund manager has not pushed the company any further. Apple announced in April that it would be increasing its stock buyback program and hiking the dividend, to which Einhorn responded favorably:
"We applaud Apple's decision to borrow money and return excess capital to shareholders, an idea that was off the table only months ago. This positive development represents a more shareholder friendly capital allocation policy and demonstrates the conviction of Apple's management and board in the company's future."
Einhorn lost interest in gold, bought Micron Technology
David Einhorn has been a gold bull for a long time, calling it a hedge against inflation, and he stuck to it through the best part of this year. Gold had appeared in the fund’s top five holdings until October of this year, but the precious metal isn’t listed there anymore. If the fund indeed cut its position in the lustrous metal, it could have saved itself from some of the steeper losses that are possibly coming gold’s way in the wake of the Fed’s taper. Gold ended the year with its worst loss since 1981, the metal’s price declined 28% in 2013.
Greenlight Capital’s winners and losers in short portfolio
Earlier we mentioned how Greenlight’s short book was not doing well because most of the positions rallied this year. Green Mountain Coffee Roasters Inc. (GMCR), Einhorn’s oldest and probably largest short, gained over 80% through the year. Einhorn added to the position in the third quarter and has been patiently waiting for the company to miss the market’s expectations. He believes that the company has some questionable accounting practices which inflate the amount of revenue it generates.
Returns of European portfolio were mixedThe fund wrote about its new long position in Osram Licht AG (OSR) OTCMKTS:OSAGF in its third quarter letter. Osram provides lighting products and was sold by Siemens this year. Einhorn believes that the company will successfully complete its turnaround plan, which involves cost restructuring and a greater focus on the LED business. The hedge fund expects the company to achieve its targeted margins over the course of two years. Greenlight bought its position at $25.57/share. The stock now trades around 40 euros, thus generating +70% return for the fund’s holding.
Among foreign holdings, Greenlight is shorting Daily Mail and General Trust plc (DMGT), where Einhorn’s position amounted to $244 million at the end of third quarter. Luck has not been on Einhorn’s side on this one either, as shares of the publishing company are up 75% this year, putting pressure on the fund’s bearish bet.
One of the best short bets of Einhorn was disclosed at the beginning of the second half of 2013. Greenlight bet $30 million against Outotec Oyj HEL:OTE1V, a Finland-based company involved in providing services to the mining industry. Shares of Outotec lost 28% of their value over the course of this year, making it one of Einhorn’s best shorts on board.
Another short bet is held in FLSmidth & Co. A/S (FLS), which provides machinery to the cement and minerals industry. Shares of FLSmidth & Co were down 10% at the end of 2013, helping Greenlight’s $76 million bet that the Danish company’s market will fall.
Although the S&P 500 was up over 30 percent this year, Greenlight did very well compared to other peers. Jonathan Gasthalter, a spokesman for Greenlight, declined to comment.
- Additional reporting by Jacob Wolinsky
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