David Einhorn continues to remind investors why he is among the elite of the younger generation of hedge fund managers.
In May the 43-year-old founder of Greenlight Capital lost only 1.5 percent compared with a loss of 6.3 percent for the S&P 500 and 7.2 percent for the Nasdaq Composite.
This puts Greenlight up about 2.7 percent for the year through May.
The results were reported by Greenlight Re, a reinsurance company established by Einhorn. The investment portfolio is managed by DME Advisors, which along with Greenlight Capital, is an affiliate of Greenlight Re.
According to Greenlight Re, as of May 31, the largest disclosed long positions in its investment portfolio are Apple, General Motors, gold, Marvell Technology Group and Seagate Technology.
Its investment portfolio is roughly 92 percent long and 50 percent short. The insurer stresses the exposure analysis is calculated on a notional basis and does not include cash, credit default swaps, foreign currency positions, gold, interest rate derivatives, sovereign debt and other macro positions.
Greenlight’s funds were up 6.8 percent in the first quarter net of fees and expenses, according to the first quarter letter sent to investors in the hedge funds.
In the letter, he emphasizes the positive prospects for Apple, which he points out is underweighted by hedge funds. “We suppose the worry is that there is a herd mentality among hedge funds, and that when one fund sells there could be cascade of hedge funds selling shares and the stock price will collapse,” he told clients.
He also asserts that most investors mistakenly view Apple as a hardware company when in fact it is a software company. He explains the company’s value comes from iOS, the App Store, iTunes and iCloud. He stresses that consumers who buy one Apple product are likely to buy additional ones.
He also said that, in January, Seagate forecast $20 billion in revenues for this year, up from the consensus forecast of less than $15 billion. In addition, it plans to use some of its excess cash to reduce its share count by 25 percent. This will enable Seagate to generate higher earnings per share when business conditions eventually normalize, Greenlight told investors.
In the first quarter, the hedge funds also opened up to existing and new investors for the first time since the last quarter of 2008. A big chunk of the new capital was invested in the dollar series of the Greenlight Capital Gold funds.
