By Svea Herbst-Bayliss
Jan 23 Hedge fund manager David Einhorn, whose
moves are closely watched in the markets, told investors this
week he is sticking with some of the names he has long liked
even though they hurt his fund's performance last year.
Einhorn loaded up on Marvell Technology Group,
which had been last year's biggest loser, and he jumped in to
buy Apple after the technology company's stock price
had cratered. Einhorn also said he is sticking with his negative
outlook on Japan, where his bearish bet finally began to pay off
late last year.
Einhorn also told investors that he shorted nutritional
supplements company Herbalife last year but has no position in
the company now, a person familiar with his presentation to
The battle around Herbalife has captivated Wall Street ever
since William Ackman publicly announced his $1 billion short
position, sending the shares tumbling in late December. Ackman
is now effectively facing off against fund manager Daniel Loeb,
who put on his long Herbalife position after the Ackman
presentation when the shares were inexpensive. Loeb has told his
clients that he sees the stock price running higher. People
familiar with Kynikos Associates said that its manager Jim
Chanos was probably short Herbalife last year as well.
While much looks the same in Einhorn's $8 billion Greenlight
Capital portfolio, the manager also initiated new positions. He
is betting against the future of some iron ore companies,
arguing that supply is now outstripping demand. Einhorn did not
name the companies he is shorting, sticking with tradition where
most short sellers stay mum about exactly what they are doing.
Looking back on 2012 when his fund earned roughly 8 percent,
Einhorn said performance was not a catastrophe but fell short of
his goals. Einhorn blamed results on the fourth quarter when the
fund lost nearly 5 percent, cutting "our year from good to
With his typical wry humor, Einhorn told clients in his
five-page investment letter "Our coffee was too hot, our apple
was bruised, and our iron ore supplements didn't go down
He was referring to coffee roaster Green Mountain Coffee
Roasters, which Einhorn had expected to fall. But when
the stock price rose late in the year, it wipe out all the
profits he had accumulated through those trades.
Similarly, Apple gave back all of its third quarter gains,
Einhorn said, when the stock price tumbled to $532.17 from
$667.10. But he said he used the low stock price to repurchase
the shares he sold in the third quarter.
In Marvell, Einhorn said disappointing earnings early in
2012, followed by a $1 billion award in a patent infringement
suit, hurt the company. But this year, the outlook is better.
"We expect the shares to sprint higher in 2013," Einhorn
wrote about the semiconductor company, noting that the patent
infringement award will be significantly reduced or eliminated
"Though we would love to admit we are wrong, sell the stock
and move on, we continue to like the opportunity here," he
wrote, adding that Marvell is on the cusp of a "large product
transition," which has not been fully valued.
Einhorn also added to his position in Vodafone after
the stock fell on news that he says "just didn't seem that bad."
Vodafone owns 45 percent of Verizon Wireless and the head of
U.S. telecommunications giant Verizon Communications has said
that it may buy Vodafone, a move Einhorn appears to endorse.
"Maybe there is an investment banker with time on his hands
reading this letter," Einhorn wrote.
Turning to General Motors, a stock Einhorn said he
liked at an industry conference in October, the manager praised
the car maker for its share repurchases but said it still has
more capital on hand to reward investors with more buy backs
either from the government or in the open market.
Einhorn, like many other investors, has been pessimistic
about Japan's prospects, and said those bearish views have
finally begun to pay off. He said the yen has started to weaken
in the wake of a change in leadership in Japan and suspects the
currency will fall more. "We suspect there is more to come,
possibly a lot more to come. We remain bearish." The falling yen
helped offset what Einhorn said where the fund's lumps on gold.
Einhorn has long been a favorite with big investors thanks
largely to his outstanding long-term record where he has earned
an average annual rate of return of 19.4 percent since his wife
gave him the go-ahead to launch the fund in 1996.
In reviewing the year, Einhorn said long positions,
including his bet on Apple which soured only at the end of the
year, fueled performance. He said he lost money on the short
side of the portfolio.