Billionaire David Einhorn’s Long-Term Stock Picks
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David Einhorn’s Greenlight Capital is a long/short value-oriented hedge fund whose success over the past 16 years has recently put him over the $1 billion net worth mark. He has famously short sold companies such as Allied Capital, Lehman Brothers, and Green Mountain Coffee Roasters when he believed they were overvalued. Einhorn reports his long positions in US stocks in 13F filings as other hedge funds do (see Einhorn’s latest reported stock picks). While some of his trades tend to play out over a fairly short period of time, there are other positions that he has held consistently for years. Here are five stocks that Einhorn has owned for the last 2 years:
Apple (NASDAQ: AAPL): Obviously, this position has paid off well for Einhorn. While he has added to his stake considerably since the summer of 2010, the shares he held at that time have increased in value by 144%. Apple arguably has further to run given its strong position across the hardware spectrum from smartphones to tablets to laptops and the fact that its powerful brand is breaking out of cult status and into the mainstream. Still, it must deal with competition from a number of large technology companies from Google to Amazon to Microsoft. Einhorn thinks Apple could reach $1 trillion in market cap. We agree with him.
Carefusion (NYSE: CFN): This medical technology company provides equipment designed to deliver medication, antiseptic products, and surgical instruments. Einhorn has slightly trimmed his shares but has patiently kept it in the portfolio as the share price has gone up by about 12% since the end of June 2010, underperforming the S&P’s 39%. CFN trades at about 13 times forward earnings estimates, slightly above its larger peers. In its most recent quarter the company reported revenue growth compared to the same period in the previous year, but a sharp fall in net income.
Microsoft (NASDAQ: MSFT): Microsoft has risen 40% since summer 2010 as it has had trouble expanding its business beyond its operating system and productivity software cash cows, and Einhorn has barely touched his position in the stock. It will be interesting to see how the stock price reacts to Microsoft’s attempts to enter the tablet PC business, and whether or not Einhorn approves of the announcement and of any changes in the stock price it brings about. Microsoft recently reached the disappointing milestone of its first quarterly loss, but is beginning to look like a potential value investment. Microsoft, like Apple, finds a place on the list of the 10 most popular stocks among hedge funds (see the entire list here).
Ensco (NYSE: ESV): Also up about 40%, Ensco is a contract driller that owns a number of offshore drilling rigs and operates them around the world. It is currently trading at value levels -- 14 times trailing earnings, and 7.5 times forward estimates, as quarterly earnings have been on the rise -- and pays a 3% dividend yield. It also trades right at book value, relevant for a company whose drilling rigs give it an asset base. Einhorn has sold most of the shares in this company that he owned in June 2010, but it is still the ninth largest holding in his 13F portfolio.
NCR Corp (NYSE: NCR): NCR, formerly known as National Cash Register, has doubled in value since June 2010. The company is more than just cash registers: it provides ATMs and self-service kiosks, and has been growing its earnings rapidly. A trailing P/E of 55 becomes a forward P/E of 8.5 once analysts’ expectations for future growth are taken into account. Einhorn has steadily trimmed his exposure to NCR, possibly taking profits as the stock has outperformed the S&P 500, but still owns a total of 9.6 million shares and according to 13F filings is still the largest hedge fund holder of the stock. Billionaires Ken Fisher and Steven Cohen are also among the top holders of NCR (see Steve Cohen’s stock picks).
This article is written by Matt Doiron and edited by Meena Krishnamsetty. Meena has long positions in Apple and Microsoft. The Motley Fool owns shares of Apple, Ensco, and Microsoft. Motley Fool newsletter services recommend Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.