David Einhorn’s Top Sells: 2 Potential Shorts, 1 I’d Rather Buy
Ashish is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
I discussed some of the David Einhorn’s top buys from the last quarter in my previous article. In addition to buys, it is also interesting to have a look at the top stocks where David Einhorn is exiting his positions and booking profits. In this article, I take a closer look at three stocks where David Einhorn’s Greenlight Capital has reduced its holdings in the last quarter.
Research In Motion Limited (NASDAQ: BBRY): My Take - Sell
David Einhorn sold 1,323,317 shares of Research In Motion last quarter decreasing his position by 45%. RIMM has become an orphan stock after Google’s (NASDAQ: GOOG) acquisition of Motorola Mobility and Microsoft’s deal with Nokia. Going forward, the mobile ecosystem is likely to be dominated by Apple’s (NASDAQ: AAPL) iOS, Google’s Android and Microsoft’s WP7 operating system. After Google and Microsoft’s deal with rivals, there is no one left to bail out RIMM and it is heading towards a slow death. I see little hope that RIMM can see any turnaround on its own. Although every now and then some rumours on potential acquisition of RIMM emerge, I don’t see any chances of that happening in the near term. I believe the stock will likely continue its downward journey in the near future.
Sprint Nextel Corporation (NYSE: S): My Take – Sell
David Einhorn sold 1,323,317 shares of Sprint last quarter. Although the company reported better than expected earnings last quarter, I am concerned about its future prospects. I believe operational improvement at Sprint will take time. Despite better than expected results, all of its key drivers including subscriber addition and service revenue growth were still negative. I am also concerned about the competitive and margin impact of the eventual LTE iPhone. In addition, Network Vision costs are ramping up and I am not sure about the timing and prospects of Sprint realizing any tangible benefits from it.
Microsoft Corporation (NASDAQ: MSFT): My Take – Buy
David Einhorn sold 7,683,647 shares of Microsoft last quarter decreasing his position by 50%. I don’t agree with Einhorn on Microsoft and believe it is a buy instead of sell. Microsoft has seen 11.93% gain YTD in 2012 versus NASDAQ’s 8.92% gain. The main drivers for this upside have been the strong business trends as evident from its last quarter earnings release and the excitement surrounding Windows 8 launch. With a strong product pipeline and low valuation (9.58x forward earnings), I believe a substantial upside is still left in the stock and investors should use the recent 7-8% correction as a buying opportunity.
In the near term, I believe news on Windows 8 partner build up will likely act as a catalyst for the stock. Medium term drivers include a successful Windows 8 launch, NOK-WP7 phone gaining traction, strong enterprise business momentum driven by Windows 7 corporate refresh cycle; Strong customer momentum on Office 365 and Windows Azure; Reducing losses from the Online Service Division and market share gains of Bing. I also see the potential catalysts in the Multiple product launches including Office 15, Windows Server 2012, System Center 2012 and SQL Server 2012.
Further, Microsoft’s defensive nature of business; net cash holdings of $45 billion and an attractive 2.70% yield should provide downside support in case the broader macros worsen.
TheAnalystBlog has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple, Google, 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.