Recently, we have been going through our extensive database which covers over 700 hedge funds and decided to look closer at the top large-cap picks of David Einhorn, the manager of Greenlight Capital. We have run several backtests and it turns out that Einhorn’s top five equally weighted large-cap positions returned 0.29% in average monthly gains versus an identical 0.29% for the S&P 500 between 2008 and 2012. The rather underwhelming recent results of Einhorn’s performance are much stronger if we consider a larger time span however. If one invested into David Einhorn’s top large-cap stocks in equal proportions back in 1999, his wallet would become heavier by some 0.81% each month through 2012, while achieving an average monthly alpha of 0.46%. Equivalent investments in the S&P 500 would have brought only 0.39% returns on average per month. Keeping that in mind, let’s see how Einhorn’s top five large-cap positions stand as of March 31, with Apple Inc (NASDAQ:AAPL), Micron Technology Inc (NASDAQ:MU), General Motors Company (NYSE:GM), Time Warner Inc (NYSE:TWX), and Liberty Global plc (NASDAQ:LBTYK) being the five stocks in question.
However, we don’t just track the latest moves of funds. We are, in fact, more interested in their 13F filings, which we use to determine the top 15 small-cap stocks held by the funds we track. We gather and share this information based on 16 years of research, with backtests for the period between 1999 and 2012 and forward testing for the last 2.5 years. The results of our analysis show that these 15 most popular small-cap picks have a great potential to outperform the market, beating the S&P 500 Total Return Index by nearly one percentage point per month in backtests. Moreover, since the beginning of forward testing in August 2012, the strategy worked brilliantly, outperforming the market every year and returning 135%, which is more than 80 percentage points higher than the returns of the S&P 500 ETF (SPY) (check our our research).
Follow David Einhorn's Greenlight Capital
The first stop on our list is to the cozy stock confines of Apple Inc (NASDAQ:AAPL), in which Greenlight Capital trimmed its equity stake by 14% during the first quarter. After this adjustment, the fund was holding 7.44 million shares valued at $925.41 million as of March 31. The $728 billion tech giant does not need any special introduction, and its stock is up by nearly 14.55% year-to-date and over 34.40% over the past year. Among the recent moves of the company, we can mention the new service Apple Music, which was launched at the end of June globally. Famous activist investor Carl Icahn of Icahn Capital LP heads the list of the top shareholders in Apple Inc (NASDAQ:AAPL) with 52.76 million shares valued at $6.57 million. During the first quarter Icahn did not make any changes to the position.
The total stake of Greenlight Capital in Micron Technology Inc (NASDAQ:MU)’s stock amounted to 33.55 million shares worth $910.20 million at the end of March. Einhorn decided to add 8% to his position in this stock from the previous quarter. Micron Technology Inc (NASDAQ:MU) is a $20.62 billion technology heavyweight which operates in the information technology sector, and manufactures semiconductor equipment and related devices. Following the weakening PC demand and negative forecasts on the future performance of the industry, Micron disappointed its investors during its latest earnings call on June 25. The shares of the company slid by around 6.9% after missing both the top and bottom line estimates, when the reported EPS was $0.54 instead of the $0.57 consensus. Since then, the price of shares has not recovered, as what is really worrisome is that the management of the company revised downward their guidance for the next quarter revenues from the consensus of $4.16 billion to $3.45-$3.7 billion. Among the top shareholders of Micron Technology Inc (NASDAQ:MU), the second spot is occupied by Andreas Halvorsen’s Viking Global with 31.15 million shares valued at $844.99 million.
The holding of General Motors Company (NYSE:GM) in the equity portfolio of Greenlight Capital amounted to 9.47 million shares with a market value of $355.05 million as of March 31. Year-to-date the shares of this automobile manufacturer are down by 4.81%, while the industry as a whole returned around 20.66%, driven by increased demand from cheap oil consumers. Warren Buffett’s Berkshire Hathaway finished the first quarter with 41.00 million shares on the balance, which were valued at $1.54 billion.
David Einhorn trimmed his holding in Time Warner Inc (NYSE:TWX) by a mere 1%, ending up with 3.78 million shares valued at $319.05 million after the first three months of the year. On June 16, analysts from JPMorgan Chase & Co. updated their price target in this $73 billion media company to $96 from $91, while the shares are currently traded at $88.49. The largest shareholder of Time Warner Inc (NYSE:TWX) in our database, as of March 31, was OZ Management, led by Daniel S. Och, owning some 9.06 million shares worth $764.61 million.
Lastly, Einhorn reported owning 3.11 million shares of Liberty Global plc (NASDAQ:LBTYK), worth $154.86 million. Liberty Global Plc (NASDAQ:LBTYK) is the largest international cable manufacturer, operating in 14 countries around the world. The company aims at high growth, both organically and through M&A deals. One of the latest consummated acquisitions was closed with Liberty Cablevision of Puerto Rico LLC, the second-largest cable and broadband services provider in Puerto Rico. On June 3, investors lost a substantial 6.85% during a single day. It is interesting that such a downturn occurred on a large relative volume and without apparent negative news. According to our database, Boykin Curry’s Eagle Capital Management topped the list of the largest shareholders of this company, owning around 32.72 million shares valued at $1.63 billion.
Disclosure: None
