Be sure to check out our detailed stock analysis (click
, founder of value-oriented hedge fund Greenlight Capital,
managed to return some 21.5% annually through 2010 (since he
started Greenlight in 1991). Greenlight and Einhorn employ a
fundamental approach to investing, focusing on intrinsic value.
During the fourth quarter last year, Einhorn reiterated his
confidence in a couple of his top picks by adding to his
positions, notably keeping a certain tech giant as his top pick,
while also betting on a couple other tech companies. Let's take a
look at some of Einhorn's most notable trades (check out
Einhorn's top picks).
Einhorn increased his
Apple Inc. (
position, upping his shares 15%, keeping the tech giant as his
top stock pick, which now makes up 10.8% of Greenlight's
Apple Inc. has fallen over $250 since its $700 peak late last
year, and now the stock appears rather cheap on a number of
levels (see what you should make of Apple). The tech company
trades around 10 times earnings, compared to its five-year
average multiple of 16 times. Although its P/E of 10 is in line
with those of its peers, such as IBM and Intel, the case can be
made that Apple deserves to traded at a premium, for Apple has
exerted the ability to generate outsized growth despite a
struggling economy. Analysts expect Apple to grow EPS at 19%
annually over the next five years, compared to the 10% forecasted
for both IBM and Intel.
Part of the decline can be attributed to the fact that hedge
funds fell out of love with Apple Inc. during the fourth quarter.
This mass exit by hedge funds appears to have caused an
"oversell" of the stock and induced panic among individual
investors. Thanks to the price drop, the company already pays a
2.5% dividend yield, but Bloomberg analysts believe that Apple
Inc. will boost its dividend by over 50% to $4.14 per share,
which would be a 3.6% dividend yield based on its current share
Marvell Technology (
was another buy for Einhorn; he upped his stake 58% and now has
Marvell as his fourth largest holding. Marvell has been in
Einhorn's top ten holdings since his hedge fund first bought the
stock during the third quarter of 2011.
The stock is still down 15% to 20% from where Einhorn bought it
and he appears to be holding on for a turnaround. Company sales
fell 7% in 2013 and the company's general business model has been
under pressure due to its exposure to the PC business (with
regards to its hard disk drives). However, the company's future
will be driven by its mobile-focused products, including its
latest wireless chips which has the ability to send 3G data to
mobile devices anywhere in the world. As well, the company hopes
to expand its product portfolio to include new networking and
was another one of Einhorn's additions, upping his stake 48% and
moving the stock to his fund's 7th largest position. With the
expected rise in Medicaid and Medicare, Aetna has been looking to
break into the market, and this includes its acquisition of
Coventry Health Care and Genworth's Medicare Supplement business.
Also, as baby boomers start to hit retirement ages, the need and
demand for managed health care plans is expected to rise. Aetna's
healthcare segment, which includes managed health care plans,
make up 92% of Aetna's revenues, making the company an
interesting play on the aging population.
were two other stocks Einhorn added to his portfolio last
quarter. One of Google's under-appreciated opportunities lies in
its YouTube platform. Alexa ranks the video website as the third
most popular website in the world, while Google itself ranks as
the number one site. Alas, Google has yet to figure out how to
successfully monetize the video-site giant, leaving lots of room
for revenue growth.
In 2012, Google generated 62% of revenue from owned websites
(i.e., search), which has been Google's staple over the past few
years, helping drive revenue growth at a compounded annual growth
rate of 18% over the last five years.
I think Google will continue to dominant the search game,
currently owning over 65% of the market share for U.S. searches,
but I also believe that YouTube and its recent Motorola
acquisition will become a bigger part of revenues in the future.
Einhorn's other major addition,
, is the European mobile communications company paying a dividend
yield of 5.5%. Vodafone has over 80% of its sales exposed to the
rapidly growing smartphone market, and the company is looking to
the emerging markets for more growth. Most notably, Vodafone now
has an agreement that will expand its presence beyond Europe to
the Middle East and North Africa.
Now, as far as the value that Einhorn sees in Vodafone, it has a
lot to do with the fact that he believes that Verizon
Communications derives almost all of its value from its 55% stake
in Verizon Wireless, but the market is only attributing around a
few billion dollars in value to Vodafone's 45% interest in
Verizon Wireless (see why Vodafone is below fair value).
Einhorn still loves Apple Inc., and recently touted his iPrefs as
a way for the company to unlock shareholder value, including
putting to use its $137 billion cash position. Meanwhile, the
billionaire fund manager also snatched up more shares of search
giant Google, which holds a dominant position in both search and
mobile operating systems (with Android). Other notable Einhorn
faves include Marvell and Aetna, both of which should perform
well over the interim. Lastly, Einhorn added Vodafone to his
portfolio based on the fact that the market appears to be steeply
undervaluing the company's 45% ownership of Verizon Wireless.
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