David Einhorn of Greenlight Capital Management is considered
one of the most successful hedge-fund managers of all time. With
anet worth of more than $1 billion and assets under management of
more than $6 billion, Einhorn's smallest moves are watched
closely byinsiders .
Einhorn's reputation has been built upon theshort sale .
He first rose to fame in 2002 after taking a huge short position
in Allied Capital and making millions on accusations of
fraudulentaccounting practices that sent itsstock crashing.
But his big leap into superstardom came in 2008 with hiscall on a
Lehman Brothersbankruptcy . At the time, it was a hugecontrarian
opinion, and when it came to fruition in the financial crisis
later that year, he made billions.
He followed that legendary call with another huge short position
in 2011, this one in
Green Mountain Coffee Roasters (Nasdaq: GMCR)
, right beforeshares crashed from more than $100 to less than
$20. These are the kind of big-moneyinvestments Andy Obernmueller
looks for in his "
That incredible string of winners has lifted Einhorn's Greenlight
Capital Management to 22% annual returns since 1996 -- one of the
best track records in the history of hedge-fund managers.
Clearly, Einhorn is a hedge-fund manager who knows how to analyze
a stock and identify company weaknesses and strengths. And with
themarket trending higher in 2012, Einhorn aggressively added to
his long positions.
Einhorn's six biggest stock purchases last year:
From this group, I have chosen to highlight
Apple (Nasdaq: AAPL)
because it's Einhorn's largest position and
Cigna Corp (
because of its exposure to long-term growth in health care
Einhorn's position in Apple represents almost 11% of his entire
portfolio. After boosting his stake in Apple by 20% in 2012,
Einhorn now owns 1.3 million shares.
As a big advocate of valueinvesting , Einhorn's interest in Apple
makes sense. After falling 32% in the past six months, Apple's
forwardP/E (price-to-earnings) ratio of 10 times is a 10-year low
and a 30% discount to the S&P 500's forward P/E of 15.
Although Apple's growth has slowed, the company is still
anearnings machine.Analysts are calling forearnings per share (
) of $51 in 2014 and annual growth of 15% in the next five years,
almost double the industry average of 8%.
And don't forget the solid 2.4%dividend yield . But with more
than $100 billion incash on thebalance sheet , there is plenty of
room for buybacks anddividend increases.
A leading provider ofhealth insurance in the U.S. and
internationally, Cigna has amarket cap of $18 billion.
Cigna already occupies a leading position in the health insurance
industry, and it is continuing to expand into other segments of
health care. Its $43.8 billion purchase of HealthSpring in 2012
immediately made it a big player inMedicare Advantage, which
provides eligible participants with private health care options.
Cigna also appears to be insulated from potential threats of
health care reform, thanks to administrative services accounting
for 85% of its domestic business. The company also continues to
expand into high-growth Asian markets such as China and South
Korea. Despite all that good news, however, Cigna still
looksundervalued , trading with a P/E ratio of 10 times that is
in line with its 10-year average but a sharp discount to the
S&P 500's 15 times.
Risks to Consider:
David Einhorn's performance has cooled in the past few years.
His huge position in Apple is also being called into question
after an unsuccessfulproxy battle to create a special class of
shares and share buybacks.
Action to Take -->
David Einhorn is one of the most successful hedge-fund managers
of all time. Although Einhorn built his reputation on shorting,
he made big additions to his long positions in 2012. These
sixstocks saw the biggest increase in total positions. From that
group, my two favorites are Apple because it's Einhorn's biggest
position and Cigna because of its exposure to thebullish growth
trend in health care. Given Einhorn's votes of confidence in
these companies, their stockswarrant fresh attention.