Gold or Apple?

There are only two types of investors at the moment. On the one hand are the pessimists who worry about deficits, inflation, and the sinister policies of the Fed. These folks see gold as the best, perhaps only, investment now. On the other hand are the sunny optimists. They're confident that America will rebound as always, and they're happy to buy great stocks like Apple (Nasdaq: AAPL  ) . Surely, you can only be in one camp or the other, right?

Wrong. David Einhorn, the renowned hedge fund manager from Greenlight Capital who alerted the world to Lehman's problems and who has waged a one-man crusade for truth against Allied Capital (NYSE: AFC  ) , is bullish on both gold and Apple. In a rare interview, he provides us with his current thinking on stocks, the economy, and investing in general. Here are some of the highlights:

  1. The big banks still have a lot of leverage, according to Einhorn. He would not invest in a major bank right now.
  2. He's very critical of QE2. He feels it will be harmful for growth right away, and that the Fed won't get the inflation level it wants. It wants inflation in house prices, but may just get more of it in energy prices. This would hurt consumers, thereby slowing down economic growth.
  3. Gold is Greenlight's largest position at the moment. Gold, to him, represents money. Given our monetary and fiscal policies, Einhorn sees gold as the money of choice that "Bernanke can't print more of."
  4. He's long on Pfizer (NYSE: PFE  ) , because it may cost-cut itself to profitability. And it pays a nice dividend, too.
  5. He has gotten very comfortable with Apple's valuation in recent months. He strongly believes that the company is in the early stages of what it can accomplish, and has a lot of growth left in it. The fact that many people think that everyone already owns it only makes it more attractive to him.
  6. Einhorn likes CareFusion (NYSE: CFN  ) , which is a spinoff from Cardinal Health (NYSE: CAH  ) , and feels that the rest of Wall Street is missing its story. He likes the business and believes it can expand its profitability.
  7. He's short Moody's (NYSE: MCO  ) because he believes the company shouldn't exist in its current form, and hopes others will come around to his point of view.

Einhorn concludes the interview by urging investors to "trust themselves," because nobody else will care more about your investments than you do. That seems like pretty solid advice from someone I admire tremendously.

And it's also nice to know that there's a place for both gold and Apple in all of our portfolios. For additional stock ideas, be sure to check out the latest thinking from our Rising Stars.

Happy Thanksgiving, Fools!

John Reeves owns shares of Apple and is enjoying Einhorn's Fooling Some of the People All of the Time. Moody's and Pfizer are Motley Fool Inside Value picks. Apple and Moody's are Motley Fool Stock Advisor selections. The Fool owns shares of Apple and Moody's. 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.


Read/Post Comments (7) | Recommend This Article (15)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 24, 2010, at 5:23 PM, langco1 wrote:

    both are great buys if you short them...

  • Report this Comment On November 24, 2010, at 6:57 PM, motleyguitarist wrote:

    @lanco1 what do you mean by

    "both are great buys if you short them...?"

    ?

  • Report this Comment On November 25, 2010, at 4:49 AM, edvale wrote:

    I assume he means he disagrees!

  • Report this Comment On November 25, 2010, at 9:02 AM, 50something wrote:

    Shorting: selling stock you don't own on the assumption that you will be able to buy it at a lower price before settlement is needed (i.e. the day you have to produce the shares). In other words he's assuming the share price will fall in the short-term and shorting is one way to profit from a fall.

    If the price rises you have to buy at a higher price so lose.

  • Report this Comment On November 25, 2010, at 2:13 PM, mattmcneil wrote:

    "The fact that many people think that everyone already owns it only makes it more attractive to him."

    What is this supposed to mean? Is he suggesting that APPL is not widely held?

  • Report this Comment On November 26, 2010, at 11:21 AM, TMFBane wrote:

    mattmcneil,

    No, I think he is saying that investors might feel that everyone who wants to own AAPL already owns it, and that that might be temporarily holding this one back. So he sees an opportunity here to pick up a great business at a reasonable price.

    Sorry for the late reply!

  • Report this Comment On November 26, 2010, at 11:36 AM, motleyguitarist wrote:

    Thank you, 50something.

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