Einhorn said that he was long Apple Inc. (NASDAQ:AAPL) and for a while this position was doing well. However, the recent correction in the stock has put it slightly down since mid May. We think that Apple currently looks like a good value at 12 times trailing earnings; analyst growth expectations imply that the stock is a screaming buy, and even though we think they might be being too optimistic a trailing P/E of 12 can be justified with even a low growth rate. Greenlight sold about a quarter of its shares in the third quarter of the year but Apple was still the fund’s largest position by market value (check out more of Einhorn’s favorite stocks).
One of the billionaire’s short recommendations was Martin Marietta Materials, Inc. (NYSE:MLM). This stock is up 22% since the Ira Sohn conference, so again Einhorn has actually missed on this pick. Martin Marietta is a $4.2 billion market cap provider of aggregates such as granite and limestone; as a result, it is dependent on activity in construction and public infrastructure. Einhorn had argued that the government would stop stimulating demand for the company’s products, which would undercut a fairly expensive valuation. Read what we think about Martin Marietta right now.
A short in United States Steel Corporation (NYSE:X) has done better: that stock is down about 4%. The most recent data shows that 26% of the outstanding shares of U.S. Steel are held short, so a number of market participants seem to still think it’s overvalued. Demand for steel is tied closely to the overall economy, and the stock has a beta of 2.1; revenue was down 8% in the third quarter from the same period in 2011. Cliff Asness’s AQR Capital Management nearly doubled its stake in the company in the third quarter (find Cliff Asness’s stock picks) and we could see it being a buy if it does actually show that it is on track to meet analyst consensus for next year as the forward P/E is 14.
Einhorn also believed that increasing competition from Amazon.com, Inc. (NASDAQ:AMZN) made Dicks Sporting Goods Inc (NYSE:DKS) a good short; Dicks has since moved very much in line with the market. Competition doesn’t seem to be too much of a problem: in its most recent fiscal quarter (which ended in October) revenue and earnings increased at double-digit rates compared to the same quarter in the previous fiscal year. Dicks was one of Citadel Investment Group’s ten largest holdings at the end of the third quarter; Citadel is managed by billionaire Ken Griffin (see more stocks Griffin likes). However, at 23 times trailing earnings, we don’t think that it’s a buy.
A number of other investors saw this one coming as well, but we’d noted at the time that Einhorn was bearish on Facebook Inc (NASDAQ:FB) and with the stock down over 20% from its IPO price even with the recent rally he should get credit for that call. There have been considerable insider sales at Facebook and the valuation is very high (it trades at 42 times consensus earnings for 2013). 20% of the outstanding shares are held short. Revenue has been growing nicely, and we’d need to look more closely before deciding if shorting is a good idea even at these levels, but we’d certainly advise against buying.
