David Einhorn
has achieved a 21.5% annualized return at his firm, Greenlight
Capital, since he founded it in 1996, by investing in undervalued
long positions and short positions. Four of his holdings are
currently trading for less than he paid for them: Marvell
Technology Group (
MRVL
), WellPoint (
WLP
), Humana (
HUM
) and Genworth Financial (
GNW
).
Marvell Technology (
MRVL
)
David Einhorn
initiated a position in Marvell in the third quarter of 2011,
buying 16,640,000 shares at an average price of $14, after the
stock declined 25% in the first half of that year. In each of the
next three quarters, he added to the position. After his most
recently reported purchase on July 16, Einhorn owned 29,595,179
shares. Marvell's stock has declined 34% from the $14 average
price that Einhorn paid for the stock to its Wednesday trading
price of $9.17.
Marvell Technology is a designer, developer and supplier of
mixed-signal and digital signal processing integrated circuit for
high-speed, high-density, digital data storage and broadband
digital data networking markets.
Marvell Technology Group Ltd. has a market cap of $5.53 billion;
its shares were traded at around $9.17 with a P/E ratio of 11.2
and P/S ratio of 1.6. The dividend yield of Marvell Technology
Group Ltd. stocks is 2.5%. Marvell Technology Group Ltd. had an
annual average earnings growth of 32.3% over the past 10 years.
GuruFocus rated Marvell Technology Group Ltd.
the business predictability rank of 2.5-star
.
When Einhorn first bought Marvell, it announced improved results
for its quarter ended July 30, 2011: a 12% sequential increase in
revenue and GAAP net income of $192 million, an increase from
$147 million in the first fiscal quarter 2012. In the previous
quarter, the company had reported an 11% sequential decline in
revenue and GAAP net income decreased from $273 million in the
fourth quarter of fiscal 2011.
Marvell CEO Sehat Sutardja attributed the results to typical
seasonality and said it was an "industry leader in profitability
for both operating and cash flow margins, demonstrating the
strength of our long-term business model."
In the company's most recently reported quarter ended July 28,
Marvell reported a 2% sequential and 9% year-over-year revenue
decrease. GAAP net income went to $93 million from $95 million
the previous quarter and $192 million in the corresponding
quarter the previous year.
Sutardja attributed the new decline primarily to a slowdown in
the macroeconomic environment that hit storage and mobile end
markets.
Einhorn commented on his Marvell investment in his second-quarter
letter:
Marvell Technology Group (
MRVL
) was the other significant loser, as its shares fell from $15.73
to $11.28 during the quarter. MRVL gave tepid guidance and Wall
Street has modestly reduced its estimates of earnings per share
from $1.25 to $1.15 this year and from $1.45 to $1.40 for next
year. MRVL has about $4 per share in cash and now trades at
roughly 5x next year's earnings net of the cash on the balance
sheet. Most of the cash is excess, and the company has commenced
what we hope will be an aggressive share repurchase program. We
have used the reduced stock price as an opportunity to increase
our stake in the company.
WellPoint (
WLP
)
Einhorn's new stake in WellPoint originated in the second quarter
of 2012. He bought 1,930,689 shares at an average price of $69.
WellPoint's stock was relatively flat for the first two quarters
of the year. Then, in July, it dropped almost 16%.
WellPoint Inc. is the largest publicly traded commercial health
benefits company in terms of membership in the U.S. WellPoint
Inc. has a market cap of $19.27 billion; its shares were traded
at around $57.65 with a P/E ratio of 8.3 and P/S ratio of 0.3.
The dividend yield of WellPoint Inc. stocks is 1.9%. WellPoint
Inc. had an annual average earnings growth of 17.2% over the past
10 years. GuruFocus rated WellPoint Inc. the business
predictability rank of 4-star
WellPoint's stock dropped in July on news that it would reduce
its full-year 2012 outlook due to a combination of lower
enrollment and slightly higher medical cost trends.
WellPoint was one of six health care companies Einhorn bought in
the second quarter amid uncertainty surrounding the direction of
government health care.
Humana (
HUM
)
Einhorn bought 1,645,000 shares of Humana in the second quarter
at an average price of $82.
Humana Inc. is a health services company that facilitates the
delivery of health care services through networks of providers to
its medical members. Humana Inc. has a market cap of $11.37
billion; its shares were traded at around $69.67 with a P/E ratio
of 9.4 and P/S ratio of 0.3. The dividend yield of Humana Inc.
stocks is 1.5%. Humana Inc. had an annual average earnings growth
of 23.5% over the past 10 years. GuruFocus rated Humana Inc. the
business predictability rank of 5-star.
Humana shares also tumbled in July when it lowered its full-year
2012 EPS guidance due to "short-term operational challenges,"
such as "higher-than-previously expected individual Medicare
Advantage benefit ratios associated with new members and
increased utilization for both new and existing members."
In the second quarter, Humana's revenues were $9.7 billion, a 4%
increase from the previous year, primarily due to increases in
its retail and employer group segments driven by increases in its
individual and group Medicare Advantage plans membership.
Cash on Humana's balance sheet increased to $1.3 billion at
quarter end from $225 million at the end of the first quarter,
primarily due to the operating subsidiaries paying higher
dividends to the parent company, and partially offset by share
repurchases and a cash dividend.
Genworth Financial (
GNW
)
Einhorn purchased 658,700 shares in the second quarter of 2012 at
an average price of $6. The stock has declined 13% since then to
trade for $5.24 per share on Wednesday.
Genworth Financial is an insurance company in the U.S. Genworth
Financial Inc. has a market cap of $2.79 billion; its shares were
traded at around $5.24 with a P/E ratio of 9.4 and P/S ratio of
0.3.
Genworth's stock price fell in April when the company announced
that it would push back the IPO for 40% of its Australian
mortgage insurance business from the second quarter of 2012 to
early 2013. The postponement was due to recent business
performance in Australia. In the 2012 first quarter, Genworth
expects its Australian segment to post a loss due to accelerated
processing of later-stage delinquencies from previous years.
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