David Einhorn‘s Greenlight Capital has filed its latest 13F with the Securities and Exchange Commission (SEC), disclosing its long equity positions at the end of 2014. The fourth quarter was a strong one for the fund, as it returned 5.6%, following a disappointing loss of 3.9% in the third quarter. That raised its full net year return to 8.0%. Although that paled in comparison to the fund’s annualized return of 18.9% since its inception, which is quite impressive, and was somewhat lackluster when compared with the 13.7% rise of the S&P 500, it did outperform the majority of hedge funds, which had returned just 2% through the end of November, as many funds were slow to react to plummeting oil prices.
David Einhorn is well known for his uncanny ability to pick the right companies to short sell. Betting on Lehman Brothers’ 2008 collapse in 2007 raised Einhorn’s credibility in this department to new heights. Moreover, Greenlight Capital doesn’t operate on leverage, or borrowed funds. The fund was founded in 1996 by Einhorn, who previously worked with Gary Siegler and Peter Collery at SC Fundamental Value Fund. A Cornell graduate, Einhorn is one of the most successful long/short equity hedge fund managers of the past decade. The fund currently has about 56.3% of its portfolio invested in information technology companies, with the fund’s portfolio 96% invested in long positions, and 66% in short positions.
Greenlight Capital’s 2014 fourth quarter investor letter highlighted some of the areas where the investment thesis of the fund managers paid off, and highlighted key investments which will drive future returns for the hedge fund. Among the most profitable long ideas with a significant holding was the fund’s stake in Apple Inc. (NASDAQ:AAPL), which was up 10% in the fourth quarter. Although Greenlight decreased its position in the Cupertino, California-based company by 566,500 shares, it is still the fund’s second largest holding, as its 8.61 million shares total 12.62% of the value of the fund’s portfolio.
Considering the sales figures of the iPhone 6 and the earnings multiple of the stock of just 14 times 2015 earnings estimates, along with less than 12 times net of cash, (based on the $110.38 stock price, at the time the investor letter was published), Einhorn believed that the company was still cheap. Other investors, like outspoken activist Carl Icahn firmly agree, with Icahn claiming Apple Inc. (NASDAQ:AAPL) shares should be $200, and pressuring the company to continue increasing shareholder value by buying back stock with their excess piles of cash, which totaled $178 billion (cash and marketable securities) at the end of the year.
Apple Inc. (NASDAQ:AAPL) has continued to perform exceptionally into 2015, up 15.13% year-to-date, and flying well past the $700 billion level in terms of market cap. All eyes are on the company and its stock now as it has the potential to become the first company in history valued at $1 trillion. While there’s still a ways to go yet, the potential is there, and Einhorn and many others remain along for the ride.
