David Einhorn's Greenlight Capital Bets on CIT Group & Pfizer: 13F Filing (Q1 2010) ~ market folly

Tuesday, May 18, 2010

David Einhorn's Greenlight Capital Bets on CIT Group & Pfizer: 13F Filing (Q1 2010)

(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 filings.)

Next up is David Einhorn's hedge fund Greenlight Capital. Greenlight is a value oriented investment firm with a focus on spin-offs, mergers and other catalytic situations. Einhorn graduated Summa cum laude from Cornell and launched his long/short hedge fund with $1 million back in 1996 and nowadays is a multi-billion dollar fund. For 2009, Greenlight's various hedge funds were up between 30.6% and 36.9% as noted in our hedge fund performances list.

Greenlight has also returned an impressive 22% annualized since inception if you needed another reason to track them. In terms of recent portfolio activity, we posted up two of Greenlight's position changes. To learn more about Einhorn's investment process, we highly recommend reading his book: Fooling Some of the People All of the Time.

The positions listed below were Greenlight's long equity, note, and options holdings as of March 31st, 2010 as filed with the SEC. All holdings are common stock unless otherwise denoted:

Brand New Positions
Xerox (XRX)
Flagstar Bancorp (FBC)
Symetra Financial (SYA)
Coinstar (CSTR)
Iconix Brand Group (ICON)

Increased Positions
Energy Partners (EPL): Increased position by 2,226.7%
Foster Wheeler (FWLT): Increased by 401%
CIT Group (CIT): Increased by 67.55%
Ralcorp (RAH): Increased by 50%
EMC (EMC): Increased by 24.5%
Pfizer (PFE): Increased by 22.63%

Reduced Positions
URS (URS): Reduced position by 50%
Health Management (HMA): Reduced by 28.5%

Positions They Sold Out of Completely
Boston Scientific (BSX)
McDermott (MDR)
BJ Services (BJS)
Patterson UTI-Energy (PTEN)
Ticketmaster (TKTM - merged with LiveNation (LYV), a position Einhorn sold)
Endurance Specialty Holdings (ENH)
MEMC Electronics (WFR)
Barrick Gold (ABX)
Huntsman (HUN)
Nike (NKE)
Sinclair Broadcast (SBGI)

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

  1. CIT Group (CIT): 14.07%
  2. Pfizer (PFE): 10.62%
  3. Cardinal Health (CAH): 8.05%
  4. CareFusion (CFN): 7.86%
  5. EMC (EMC): 5.48%
  6. Einstein Noah Restaurant Group (BAGL): 4.45%
  7. Aspen Insurance (AHL): 4.07%
  8. Travelers (TRV): 3.92%
  9. Microsoft (MSFT): 3.40%
  10. Foster Wheeler (FWLT): 3.36%
  11. Ralcorp (RAH): 3.12%
  12. URS (URS): 3.05%
  13. Health Net (HNT): 2.97%
  14. Everest Re (RE): 2.71%
  15. MI Developments (MIM)

We already knew from Greenlight Capital's investor letter that their portfolio activity was pretty muted for the first quarter and the 13F filing confirms that. That said, there are a few transactions we wanted to highlight. They added significantly to their position in CIT Group (CIT) which is intriguing because it is their top US equity long. We just noted yesterday that Seth Klarman's Baupost Group sold completely out of CIT so the divergence here is intriguing. Greenlight's exit from shares of Boston Scientific was also notable, but we already knew about that from their letter.

If you hadn't noticed, there are clearly two portfolio themes at play here: health and insurance. Einhorn has owned many of these positions for multiple quarters now and it's clear he thinks the market is undervaluing these companies' prospects. While Einhorn specifically holds a decent sized stake in Travelers (TRV), we learned yesterday that Warren Buffett sold out of TRV. So yet again, we have a divergence of opinion from two great investors.

Other notable activity out of Einhorn's hedge fund includes adding to their position in Pfizer (PFE), which is now their second largest holding. Additionally, they added heftily to their position in infrastructure play Foster Wheeler (FWLT). While Greenlight increased their position in Energy Partners (EPL) substantially on a percentage basis, the position is still relatively small in the context of their overall portfolio.

In the past, we'd also detailed Einhorn's thesis on Vodafone (VOD) but prudent observers will notice this position is not listed in the 13F filing. This is most likely because Greenlight has invested in the VOD shares traded directly in London, a security that does not require disclosure here in the US with the SEC. As we saw in Greenlight's first quarter letter, Einhorn still owns Vodafone and as a matter of fact it's one of their top positions. Additionally, they also still hold a large position in physical gold which obviously does not appear in disclosures either. Einhorn has selected physical gold as it was cheaper to maintain than paying expense ratios on exchange traded funds like GLD. To learn more about Greenlight, head to Einhorn's book entitled, Fooling Some of the People All of the Time.

Assets reported on the 13F filing were $2.93 billion this quarter. Data from the SEC is aggregated and sorted automatically by Alphaclone, our source for sorting through all the hedge fund portfolio maneuvers and backtesting the performance (Market Folly readers can receive a special free 30 day trial). Remember that these filings are not representative of the hedge fund's entire base of AUM.

This post is part of our daily hedge fund portfolio tracking series. We've already detailed activity from numerous managers so click the links below to be taken to the respective portfolio updates: Seth Klarman's Baupost Group, Warren Buffett's Berkshire Hathaway, Stephen Mandel's Lone Pine Capital, and Bill Ackman's Pershing Square Capital Management. Be sure to check back daily for new hedge fund updates.

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