Apple is Einhorn's biggest holding. Image source: Apple.
Among hedge-fund investors, David Einhorn has a reputation both for having a strong investing ability and for standing behind principles like openness, honesty, and transparency. His aggressive investing style includes buying some stocks while selling others short, and some of Einhorn's calls have been controversial. Recently, Einhorn's Greenlight Capitalreleased its latest holdings, and the hedge-fund investor continued to add to his positions in Apple (AAPL 1.69%), General Motors (GM 0.81%), and Michael Kors (KORS 0.34%). Let's look at Einhorn's rationale for buying these stocks to see if they'd be a good fit in your portfolio.
An Apple a day
Einhorn has aggressively bought Apple, whose shares make up more than 20% of Greenlight's publicly traded stock portfolio. The hedge fund added more than 3.8 million shares to its Apple holdings in the third quarter, sending its share of the fund's assets up by nearly nine percentage points. Greenlight has had a position in Apple since 2010, and its current holdings aren't as substantial as they were in 2013. But the latest addition is a big uptick from what Einhorn has owned over the past year.
Einhorn has a storied past with Apple, having sued the company two years ago over its capital allocation strategy. Since then, Apple has made annual dividend increases of about 8% to 10% per year and dramatically increased its stock buyback, with an expansion in its repurchase authorization to $140 billion this past April. The tech giant has been a long-term success story for Einhorn and Greenlight, and the recent increase in its position shows Einhorn's belief that Apple has further to run in its growth.
Heading down the highway
Greenlight also has a sizable stake in General Motors, which makes up 8% of its securities portfolio. The company added about 1.65 million shares to its existing position during the third quarter, which brought it up to 8% of the hedge fund's total assets. Einhorn's history with General Motors is even more up-and-down than with Apple, as Greenlight owned shares as early as 2011 but sold completely out of the stock throughout 2014. The fund then started building up its position in the automaker again at the beginning of 2015.
Einhorn has been optimistic about General Motors, noting that the automaker has made a lot of progress in revamping its European operations to bring them closer to profitability. In addition, the hedge-fund maven believes that lower gasoline prices will help support General Motors' sales of SUVs and higher-end trucks. With its impressive dividend yield of 4%, General Motors will pay Einhorn with valuable cash to make further investments in the future.
Coming back into fashion?
Einhorn isn't always right in the short run, but he's often tenacious. The hedge-fund investor remained committed to Michael Kors stock, doubling the fund's existing position with a 3.4 million share increase and raising its share of total assets close to the 5% mark. Kors is a new stock for Greenlight, as the hedge fund established its first position in the second quarter of 2015.
Einhorn has said that Michael Kors represents a good opportunity because it has the chance to overcome some short-term problems it has faced. Among them were a shutdown at a distribution center that hurt the retailer's e-commerce performance and an uninspiring winter product line. Yet Einhorn remains optimistic about Kors' international potential as well as its footwear business. Evaluating the luxury retailer at less than 10 times its expectations for fiscal 2016 earnings, Einhorn's move suggests that the hedge fund investor sees a rebound in Kors' future.
Greenlight Capital's 2015 performance hasn't been up to its usual level, with the fund having taken a 16% hit for the year as of October. Yet Einhorn's rationale for owning these three top holdings makes a compelling case that investors should consider in making their own decisions about Apple, GM, and Kors.
