Green Mountain Coffee Roasters Inc. (GMCR), Apple Inc. (AAPL): How To Invest Like David Einhorn

David Einhorn’s Big Wins
That scientific approach to numbers and analysis has produced some big victories for Einhorn.

Einhorn’s reputation took a quantum leap forward in 2002 after he was invited to speak at a presentation where investors pay to hear leading hedge fund managers discuss their best investment ideas. Einhorn unleashed an attack on Allied Capital, a mid-size private-equity firm, suggesting the company was manipulating its accounting standards and valuing its debt incorrectly. Shares opened 20% lower the next morning, and the legend of Einhorn as a short seller was born.

But it wasn’t until a few years later when his reputation as a remarkable analyst and short seller was sealed with what is still considered the best call of his career. That distinction came on Einhorn’s early warnings and move on Lehman, using his forensic accounting skills to spot another company that was hugely vulnerable to any kind of weakness in the economy or housing with an overleveraged balance sheet. At the time, that was a hugely contrarian opinion, leading many to think Einhorn was crazy. But those are the trades with the most potential, and in the end, Einhorn netted billions shorting Lehman.

Einhorn followed up that legendary call with another huge short position in 2011, this one in Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR), right before shares cratered from more than $100 to less than $20. It was another incredible call where Einhorn placed huge bets on a company directly before its share price cratered. It also added to the growing belief that Einhorn is the most potent short seller on the Street.

That incredible string of winners helped Einhorn’s Greenlight Capital Management to deliver an average annual gain of 20% since 1996, one of the best track records in the history of the hedge fund industry.

David Einhorn’s Portfolio: What’s He Holding Now?
As one of the youngest players in his field, Einhorn remains plenty active in managing his fund. But right now, he is more focused on the long side of the market, with no outstanding shorts that the market is closely watching. His largest position remains Apple Inc. (NASDAQ:AAPL), where Einhorn has invested close to $1 billion, accounting for 18% of his portfolio. Einhorn also owns a big stake in General Motors Company (NYSE:GM) with a stake valued at $568 million, occupying 11% of his portfolio.

Action to Take –> Einhorn is going to be on the hedge fund scene for many years to come, in position to continue capitalizing on his detailed research and analysis from both the long and short side of the plate. But since hedge fund managers are not required to report short positions, it is best to follow Einhorn’s buys. Right now, his two biggest positions are Apple Inc. (NASDAQ:AAPL) and General Motors Company (NYSE:GM), which mean this hedge-fund billionaire sees plenty of upside in both companies.