Apple Inc. (NASDAQ:AAPL) shares have moved higher over the last month, and the Cupertino tech giant beat expectations for iPhone sales last quarter, supporting Greenlight’s thesis.
Microsoft could be on the verge of collapse
Greenlight is particularly grim about Microsoft Corporation (NASDAQ:MSFT)’s future. Einhorn’s fund sold out of the Windows-maker after ValueAct’s $2 billion purchase, and it doesn’t appear that Einhorn will be buying back the stock anytime soon.
Greenlight compares Microsoft Corporation (NASDAQ:MSFT) to the Yankee’s Alex Rodriguez — a superstar years ago, but now on the verge of a lifetime ban from MLB. Writing that Windows 8 appears to be “a flop,” Greenlight thinks Microsoft Corporation (NASDAQ:MSFT) is at risk of becoming a shrinking company.
Of course, the firm takes the opportunity to criticize Microsoft Corporation (NASDAQ:MSFT)’s CEO Steve Ballmer. Over the years Einhorn has been outspoken in his opposition to Ballmer’s leadership, and in the letter, Greenlight refers to Microsoft Corporation (NASDAQ:MSFT) having been “mismanaged for a decade.”
Ron Johnson was going to turn J.C. Penney into a penny stock
Greenlight made a killing shorting J.C. Penney Company, Inc. (NYSE:JCP) in 2012, but has decided to cover. The catalyst for the investment seems to have been (now former CEO) Ron Johnson.
Greenlight writes:
Though the retailer was poorly positioned, the shares rocketed in early 2012 based on overhyped promises put forth by a highly promotional CEO. Following the presentation of its strategy, the new CEO dumped a bunch of his personal stock on the market. We doubted the new strategy would succeed. We covered when the Board fired the CEO before he could turn the company into a penny stock.
That doesn’t sound like a sterling recommendation for the discount retailer going forward. As Greenlight notes, J.C. Penney was in a difficult position before Ron Johnson even took over, and his time there seems to have only made matters worse.
Yet, if Greenlight is covering, the firm obviously thinks the worst is over, and that the stock’s downside is limited.
But don’t take Einhorn’s word for it
Although Einhorn has had some great wins over the years (Lehman Brothers, Allied Capital) investors shouldn’t attempt to simply replicate his portfolio. Last October, before presenting his GM idea, Einhorn himself urged investors to do their own work.
With that in mind, it my not be wise to blindly follow Einhorn into Apple Inc. (NASDAQ:AAPL) and GM, out of Microsoft, and into shorting Green Mountain. But given Einhorn’s impressive track record and his investment acumen, his firm’s ideas should at least be considered by interested investors.
The article Microsoft Is at Risk, Apple Is Misunderstood, and 3 Other Ideas From David Einhorn originally appeared on Fool.com.
Sam Mattera owns shares of J.C. Penney Company. The Motley Fool recommends Apple, General Motors, and Green Mountain Coffee Roasters (NASDAQ:GMCR). The Motley Fool owns shares of Apple and Microsoft. Salvatore “Sam” is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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