David Einhorn's Greenlight Capital Betting On Boston Scientific (BSX): 13F Analysis ~ market folly

Wednesday, February 17, 2010

David Einhorn's Greenlight Capital Betting On Boston Scientific (BSX): 13F Analysis

(This post is part of our series on tracking hedge fund portfolios. If you're unfamiliar with tracking investments they disclose via SEC filings, check out our series preface on hedge fund 13F filings.)

Next up is value investor David Einhorn and his hedge fund Greenlight Capital. As we learned in Einhorn's recent investor letter, Greenlight Capital has returned 22% annualized since inception, a truly solid track record. Their emphasis is typically on spin-offs, mergers, and other value unlocking events. For 2009, Greenlight's various hedge funds were up 36.9%, 33.7%, and 30.6% as mentioned in our 2009 hedge fund performance numbers post.

The positions listed below were Greenlight's long equity, note, and options holdings as of December 31st, 2009 as filed with the SEC. Note that we are only covering the major portfolio maneuvers. All holdings are common stock unless otherwise denoted.

Brand New Positions
Boston Scientific (BSX ~ we already knew about this position from Einhorn's letter)
CIT Group (CIT)
Ralcorp Holdings (RAH)
Becton Dickinson (BDX)
Energy Partners (EPL ~ this one was a very small position)

Increased Positions
Foster Wheeler (FWLT): Increased by 92.9%
Pfizer (PFE): Increased by 23.5%
URS Corp (URS): Increased by 4.81%
Automatic Data Processing (ADP): Increased by 3.2%

Reduced Positions
Barrick Gold (ABX): Reduced by 94.7%
Huntsman (HUN): Reduced by 89.66%
Sinclair Broadcast (SBGI): Reduced by 80.7%
Teradata (TDC): Reduced by 66.2%
Patterson UTI (PTEN): Reduced by 62.3%
MEMC Electronics (WFR): Reduced by 60%
Nike (NKE): Reduced by 53.9%
Endurance Specialty Holdings (ENH): Reduced by 29%
BJ Services (BJS): Reduced by 26.7%
Ticketmaster (TKTM): Reduced by 25.9%

Removed Positions (Sold out completely):
EchoStar (SATS)
Danaos (DAC)
Teekay (TK)
Anixter (AXE)
Belden (BDC)
Crosstex Energy (XTXI)
Novatel Wireless (NVTL)
Duke Realty (DRE)
Smithfield Foods (SFD)
Aircastle (AYR)
Colonial Propeerties (CLP)
General Cable (BGC)
Liberty Media (LINTA)
Oshkosh (OSK)
Amkor (AMKR)
AerCap (AER)
Wyeth (WYE)

Top 15 Holdings (by percentage of assets reported on 13F filing)

  1. Boston Scientific (BSX): 10.54%
  2. Pfizer (PFE): 9.65%
  3. Carefusion (CFN): 7.81%
  4. Cardinal Health (CAH): 7.57%
  5. CIT Group (CIT): 6.25%
  6. URS (URS): 5.76%
  7. EMC (EMC): 4.48%
  8. Travelers Companies (TRV): 3.81%
  9. Aspen Insurance (AHL): 3.78%
  10. Einstein Noah Restaurants (BAGL): 3.78%
  11. Microsoft (MSFT): 3.71%
  12. Everest Re (RE): 3.01%
  13. HealthNet (HNT): 2.92%
  14. McDermott (MDR): 2.81%
  15. MI Developments (MIM): 2.49%
As you can see, the theme of health plays prominently in Greenlight Capital's long US equity portfolio. By far the largest activity out of Einhorn's fund in the fourth quarter was their brand new position in Boston Scientific (BSX). They also show a new stake in CIT Group (CIT), but keep in mind that this is most likely a result of the debt to equity conversion. Not to mention, we already knew of these positions since Einhorn disclosed them in his recent investor letter. However, we did not quite know the size of their BSX stake as it is now their top US equity long holding. Pfizer comes in a close second, a position which they again added to in the fourth quarter.

Another notable increase was that they almost doubled their stake in Foster Wheeler, though the position is still sized smaller relative to their overall portfolio. On the selling side, Greenlight was out in full force as they unloaded a ton of names and heavily reduced others such as Huntsman, Teradata, and Barrick Gold. Don't forget that Einhorn also has a large physical gold position that obviously doesn't show up in these filings, so that could partially explain the sale of that last position.

Keep in mind also that Greenlight also has numerous European equity positions that don't show up in a 13F filing and we know they have a large position in Vodafone Group and we also detailed their new position in F&C Asset Management. Assessing their entire portfolio, Greenlight's six largest disclosed long positions are Arkema, Boston Scientific, CIT Group, Ford Motor Company debt, gold, and Vodafone Group.

If you wanted to better understand how Greenlight hypothesizes and researches their investment themes, we highly recommend checking out Einhorn's book Fooling Some of the People All of the Time: A Long Short Story. Typically, Greenlight approaches things by identifying mispricings in the markets and then proceeding from there. Their performance track record speaks volumes as to their success.

Assets from the holdings reported to the SEC via 13F filing were $2.79 billion this quarter compared to $2.66 billion last quarter. Remember that these filings are not representative of the hedge fund's entire base of assets under management. Therefore, the figures above represent the percentage of their reported 13F assets, not their entire portfolio.

We'll be tracking 40+ prominent funds in our fourth quarter 2009 hedge fund portfolio tracking series. We've already covered Seth Klarman's Baupost Group, Mohnish Pabrai's Investment Fund and Carl Icahn's hedge fund Icahn Partners so check back daily for our updates.

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