David Einhorn's Greenlight Capital Has Big Bets on Gold, URS: 13F Filing Q1 2009 ~ market folly

Thursday, May 28, 2009

David Einhorn's Greenlight Capital Has Big Bets on Gold, URS: 13F Filing Q1 2009

This is the 1st Quarter 2009 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings series preface.

Next up is Greenlight Capital, a $6 billion hedge fund ran by David Einhorn that specializes in spin-offs and value investing and has seen annual returns of over 20%. Einhorn's name has been popping up in the media a lot over the past year, as he talked about his well documented short position in Lehman Brothers. And, while that position paid off handsomely for him, it barely offset losses he experienced from other positions. He was caught in the massive Volkswagen short squeeze as he detailed in one of his investor letters. Einhorn has also recently detailed the saga between his fund and Allied Capital, a company he shorted, in his book Fooling Some of the People All of the Time: A Long Short Story. It gives you an inside perspective as to how Greenlight constructs and researches their investment theses and we highly recommend it. Greenlight approaches things by identifying mispricings in the markets and going from there.

He has recently advocated getting long gold (GLD) and gold miners (GDX). And, at the same time, he has advocated shorting commercial real estate property REITs, saying that a drop in rents of 10% hurts values due to leverage and also points to the difficulty they will have trying to refinance debt coming due. We covered more of his recent thoughts and ideas from his most recent investor letter.

We posted up his major moves and you can also read the letter here (in downloadable .pdf format). Other notable activity includes Greenlight filing an amended 13D on MI Developments in April. In terms of performance, his offshore fund finished 2008 -16.5% as detailed in our 2008 year end hedge fund performance numbers list. But, more recently, we've noted that Greenlight was +9% for April, bringing them up to +13.8% for 2009 as of that time. Their performance and more are listed in our April hedge fund performance list.

The following were Greenlight's long equity, note, and options holdings as of March 31st, 2009 as filed with the SEC. We have not detailed the changes to every single position in this update, but we have covered all the major moves. All holdings are common stock unless otherwise denoted.

Some New Positions (Brand new positions that they initiated in the last quarter):
Nike (NKE)
Liz Claiborne (LIZ)
Everest Re Group (RE)
KKR Financial (KFN)
IPC Holdings (IPCR)
Microsoft (MSFT)
American Eagle Outfitters (AEO)
Hess (HES)
Wyeth (WYE)
Conway (CNW)
BJ Service (BJS)
Harman Intl (HAR) & Jones Apparel (JNY) - both new purchases which we covered back in April
Discover Financial (DFS)
Pfizer (PFE)

Some Increased Positions (A few positions they already owned but added shares to)
Patterson-UTI (PTEN): Increased by 340%
McDermott (MDR): Increased by 319%
Aspen Insurance (AHL): Increased by 159%
Patriot Coal (PCX): Increased by 142%
Sinclair Broadcast Group (SBGI): Increased by 101%
Republic Airways (RJET): Increased by 94%
Dow Chemical (DOW): Increased by 31%
EMC (EMC): Increased by 29%
Sunstone Hotel (SHO): Increased by 22%
SPDR Gold Trust (GLD): Increased by 14%
Helix (HLX): Increased by 14%
Teradata (TDC): Increased by 6%
MI Developments (MIM): Increased by 5%

Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
Commscope (CTV): Reduced by 47%
URS (URS): Reduced by 5%
Allegheny (AYE): Reduced by 4%

Removed Positions (Positions they sold out of completely)
CF Industries (CF)
Triple-S Management (GTS)
Sears Holdings (SHLD)
Ensco (ESV)
Dr Pepper Snapple (DPS)

Top 15 Holdings (by % of portfolio)

  1. SPDR Gold Trust (GLD): 13.6% of portfolio
  2. URS (URS): 7.4% of portfolio
  3. EMC (EMC): 6% of portfolio
  4. MEMC Electronics (WFR): 4.9% of portfolio
  5. Target (TGT): 4.9% of portfolio
  6. Gold Miners ETF (GDX): 4.8% of portfolio
  7. Teradata (TDC): 4.6% of portfolio
  8. Allegheny (AYE): 4.1% of portfolio
  9. Pfizer (PFE): 3.3% of portfolio
  10. Hess (HES): 2.9% of portfolio
  11. Einstein Noah Restaurant Group (BAGL): 2.6% of portfolio
  12. Wyeth (WYE): 2.5% of portfolio
  13. Aspen Insurance (AHL): 2.2% of portfolio
  14. Harman Intl (HAR): 2.1% of portfolio
  15. McDermott (MDR): 2% of portfolio

Einhorn continues to like Gold (GLD) and gold miners (GDX) in a big way. At over 13% of his portfolio, his gold position can't be taken lightly. So, we now have David Einhorn, John Paulson, Eric Mindich, Stephen Mandel and many other hedge fund managers all with sizable gold positions. As such, we thought it would be prudent to post up a current technical analysis video on gold, as the metal could possibly be consolidating.

Overall, Einhorn did a lot more buying than selling. His portfolio didn't change too drastically and many of the changes we had already covered through various investor letters and other SEC filings. While Bill Ackman typically gets all the press surrounding his Target (TGT) position, Einhorn also quietly has a sizable Target stake. However, Einhorn's position remained flat from quarter to quarter; he neither added nor sold.

Assets from the collective holdings reported to the SEC via 13F filing were $2.4 billion this quarter compared to $2 billion last quarter. So, they've deployed some capital on the long side of the portfolio between quarters. This is just one of the 40+ prominent funds that we'll be covering in our hedge fund Q1 2009 portfolio series. Check back each day as we cover new fund portfolios. We've already covered Andreas Halvorsen's Viking Global, John Paulson's hedge fund Paulson & Co, Stephen Mandel's Lone Pine Capital, Eric Mindich's Eton Park Capital, and John Griffin's Blue Ridge Capital.

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