At The Motley Fool, we understand that it often pays to zig when the rest of Wall Street zags. Like us, hedge funds rarely move in lockstep with the broader market. By tracking these little-followed funds' buy and sell decisions, we can often gain valuable insights into opportunities the market might be missing.

Every quarter, fund managers overseeing more than $100 million must publicly disclose their quarter-end holdings via the Securities and Exchange Commission's Form 13-F. It lists all U.S.-traded securities the fund's manager held at the end of the quarter. Although the form doesn't disclose short positions or intraquarter trades, it can illuminate long stock bets.

To better decipher this 13-F data, we turned to Motley Fool partner AlphaClone, a research and investment-management firm that develops investment strategies based on hedge funds' public disclosures.

Meet Greenlight Capital
David Einhorn founded Greenlight Capital in 1996. Einhorn has taken a defensive posture recently, investing in stocks that have a low correlation with the market and are less volatile than the market. The total market value of Greenlight Capital's disclosed equity holdings as of March 31, 2011 -- the latest quarter for which data are available -- was $5.04 billion across 38 holdings.

Why should you care? Because according to AlphaClone's backtest simulation, if you'd invested in Greenlight Capital's 20 top holdings as they were disclosed publicly each quarter, you would have earned a total return of 184.1% between January 2000 and now, versus just 10.1% for the S&P 500.

The fund's 10 largest positions (by value) and associated share-count changes as of March 31 were:

  1. Pfizer (NYSE: PFE) -- increased 7.8%.
  2. Apple (Nasdaq: AAPL) -- no change.
  3. CIT Group (NYSE: CIT) -- reduced 9.2%.
  4. CareFusion (NYSE: CFN) -- reduced 25.1%.
  5. Sprint (NYSE: S) -- no change.
  6. Ensco (NYSE: ESV) -- reduced 51.1%.
  7. The Travelers Companies (NYSE: TRV) -- increased 96.9%.
  8. Microsoft (Nasdaq: MSFT) -- increased 18%.
  9. Market Vectors Gold Miners (NYSE: GDX) -- no change.
  10. NCR (NYSE: NCR) -- reduced 10.6%.

Outside the top 10 holdings:

  • Rising positions: The fund increased its position in Becton Dickinson.
  • Falling positions: The fund reduced its exposure to Cardinal Health and Xerox.
  • Eliminated positions: During the quarter, the fund sold out of stock positions in PotashCorp and Flagstar Bancorp.

Selected Q1 2011 commentary
Greenlight Capital has a highly diversified portfolio, with technology, health-care, services, and financial stocks each making up roughly a fifth of the portfolio. Here's where the firm is winning and losing, and making new bets, at the moment:

  • Current winner: NCR did well, increasing more than 22% in the first quarter. The stock comprises fully 3.8% of the total portfolio.
  • Current loser: CIT Group fell almost 10% in the first quarter. It accounts for 5.6% of the entire portfolio.
  • New bets: New additions include Yahoo! and General Motors, which comprise 2.8% and 2.1% of the total portfolio, respectively.

So there you have it -- the blow-by-blow of Greenlight Capital's latest moves. Tell us what you think in the comments section below.

Company data provided by AlphaClone LLC, a San Francisco-based research and investment-management firm that tracks hedge-fund public disclosures. For more information on the firm's investment approach, visit AlphaClone.


Backtesting is the process of evaluating a core strategy by applying it to historical data. Backtested performance results are provided for purposes of illustrating historical performance if a core strategy had been available during the relevant period. Backtested performance results are hypothetical and have inherent limitations. AlphaClone makes no representation that any core strategy will achieve performance similar to any backtested performance results. Actual results could differ materially from backtested performance, and future results could differ materially from backtested performance. Past performance is no indication or guarantee of future results.