"Tracking David Einhorn’s Portfolio – Q4 2017 Update"
"David Einhorn's US long portfolio value decreased from $6.3B to $5.5B this quarter.Greenlight's long/short ratio is at 107% long and 66% short compared to 118% long and 73% short last quarter.Greenlight decreased General Motors & Aercap while increasing Brighthouse Financial.This article is part of a series that provides an ongoing analysis of the changes made to David Einhorn’s Greenlight Capital 13F portfolio on a quarterly basis. It is based on Einhorn’s regulatory  filed on 02/14/2018. Please visit our  series for an idea on his investment philosophy and our  for the fund’s moves during Q3 2017.Greenlight Capital’s US long portfolio value stood at $5.5B this quarter. It is down ~12% compared to $6.3B as of last quarter. The long/short ratio shifted to the short side: 107% long and 66% short - net exposure at 41% compared to 45% as of Q3 2017. The top five holdings represent ~55% of the 13F portfolio. The number of stakes increased from 36 to 43.Einhorn’s Q4 2017 letter reported that the fund returned 6.6% for 2017. This is compared to 21.8% for the S&P 500 Index. Since inception in May 1996, the fund is up 15.4% annualized net-of-fees and expenses.Their short book lost money in 2017: Amazon (AMZN), Tesla (TSLA), and Netflix (NFLX) were the biggest losers while Caterpillar (CAT), athenahealth (ATHN), & Continental Resources (CLR) also contributed to the losses. To learn about David Einhorn and the perils of shorting, check-out his “”.New Stakes:Consol Energy (CEIX): CEIX is a 1.60% portfolio position that came about as a result of the coal spinoff from CNX Resources (one share of the newly issued Consol Energy shares for every 8 shares held). Trading started last November at ~$23 and the stock is now at $32.07.Twitter Inc. (TWTR), Time Warner (TWX), and Ensco plc (ESV): These are small (~1% of the portfolio each) stakes established this quarter. Their cost-basis on TWTR, TWX, and ESV are $21.59, $89.72, and $5.72 respectively compared to current prices at $33.61, $94.99, and $4.97.Medicines Company (MDCO), JC Penney (JCP), Kohl’s Corp. (KSS), Best Buy Inc. (BBY), Wayfair Inc. (W), Shutterfly Inc. (SFLY), Carter Inc. (CRI), Under Armour (UAA), Lowes Companies (LOW), Nordstrom Inc. (JWM), Signet Jewelers (SIG), Weight Watchers International (WTW), Michael Kors (KORS), Five Below (FIVE), and SeaWorld Entertainment (SEAS): These are minutely small (less than 0.5% of the portfolio each) positions established this quarter.Stake Disposals:Rite Aid (RAD): RAD was a 0.51% stake established in Q2 2016 at prices between $7.50 and $8.20 and increased by ~30% in Q3 2016 at prices between $6.85 and $8.21. Q4 2016 saw another ~50% increase at prices between $6.50 and $8.50. There was an about turn in Q1 2017: ~20% sold at prices between $4.25 and $8.70. The disposal this quarter was at prices between $1.43 and $2.16. The stock currently trades at $2.08.Note: Greenlight has disclosed that their overall cost-basis was $7.45 and they exited at $2.78.Gold Miner ETF (GDX): GDX was a 2.83% stake as of last quarter. It was a very long-term position that had wavered over the years. Last significant activity was a ~35% increase in Q4 2014 at prices between $16.50 and $22. The position was disposed this quarter at prices between $21.50 and $24. The stock currently trades at $22.99.Note: Einhorn also has a large holding (top-five) in physical gold. He has a long-term bullish stance on gold.Hewlett Packard Enterprise (HPE): The ~2% HPE position was purchased over the last two quarters at a cost-basis of $13.29 and disposed for a small gain this quarter. The stock currently trades at $16.35.Note: Greenlight disclosed in the Q4 2017 partner letter that the disposal was prompted by the CEO exit and concerns about memory prices affecting profitability. Greenlight’s Q3 2017 partner letter had the following on HPE: they believed the company had earnings power in the $1.40-$1.70 range in the next few years (earnings depressed currently due to higher input costs & separation related expenses –scope for cost reduction).Amerco (UHAL), Cars.com (CARS), Dollar Tree (DLTR), Fred’s Inc. (FRED), Kroger Co. (KR), Monsanto Company (MON), Quorum Health (QHC), Tech Data Corp. (TECD), The Stars Group (TSG) previously Amaya, and Tegna Inc. (TGNA): These small (less than ~1.5% of the US long portfolio each) stakes were eliminated this quarter.Note 1: In September 2016, Bayer AG (BAYRY) agreed to buy Monsanto in a $128 per share all-cash deal. Greenlight has a large position in Bayer AG (native listed shares and so not in the 13F report). At the Robinhood Investor Conference in November 2016, Bayer AG was Einhorn’s stock pick.Note 2: Cars.com is a spinoff from Tegna that started trading in June 2017 at ~$24.50 and currently goes for $28.94.Note 3: Quorum Health (QHC) is a spinoff from Community Health Systems (CYH) that started trading in April 2016. The terms called for CYH shareholders to receive one share for every four shares held. Greenlight had CYH shares for which they received QHC shares in that ratio.Stake Increases:Brighthouse Financial (BHF): BHF is a large (top three) ~12% portfolio stake established last quarter and increased by ~60% this quarter at an overall cost-basis of $57.92. The stock is currently below that at $56.08. For investors attempting to follow Greenlight, BHF is a good option to consider for further research.Note: BHF is a spinoff of MetLife’s (MET) U.S. Retail business (annuities and life insurance) that started trading in July last year.Stake Decreases:General Motors (GM): GM is Greenlight’s largest position at ~19% of the portfolio. The position was established during the first three quarters of 2015 at prices between $28.50 and $39. The three quarters thru Q2 2016 had also seen a combined ~22% increase at prices between $27 and $34. The position was more than doubled in Q4 2016 thru the purchase of Calls as the underlying traded between $31 and $38. The stake was almost doubled again in Q1 2017 at prices between $34 and $38.50. The following quarter saw a ~25% reduction (liquidated Calls) as the underlying traded between $32.50 and $35.50. Last quarter saw another one-third selling at prices between $34.50 and $40.50 and that was followed with a similar reduction this quarter at prices between $40.50 and $46.50. GM currently goes for $41.85.Note 1: In March 2017, Greenlight proposed GM shares be split into two classes (one with dividend & the other without) but management rejected the plan. In response, Greenlight nominated three members to the board but GM shareholders rejected the proposal and the nominations in June.Note 2: Greenlight had a previous successful roundtrip with GM: A huge ~10% stake was disposed in Q1 2014 at an average exit price of $35.76 compared to an average entry price of $23.87.AerCap Holdings N.V. (AER): AER is a large (top three) 9.34% position. It was established in Q2 2014 at prices between $39 and $48. Q4 2014 thru Q3 2015 saw a combined ~270% increase at prices between $36.50 and $48.50. First three quarters of 2016 had also seen another ~70% increase at prices between $25.50 and $42. This quarter saw a ~20% selling at prices between $49.75 and $53. The stock currently trades at $51.97.Note: Greenlight controls 6.2% of AerCap Holdings.Mylan NV (MYL): MYL is a large (top five) 7.83% of the portfolio position established in Q4 2015 at a cost-basis of $45.32. Q2 2016 saw a ~70% increase at prices between $38.50 and $49 and that was followed with another ~30% increase in the following quarter at prices between $38 and $50. Q4 2016 also saw a one-third increase at prices between $34 and $39. Q2 2017 saw another ~23% increase at prices between $36.50 and $40. The stock currently trades at $41.65. For investors attempting to follow Greenlight, MYL is a good option to consider for further research. There was a ~5% trimming this quarter.Voya Financial (VOYA) previously ING US: The fairly large ~5% VOYA position was established in Q2 2013 at a cost-basis of $20.29. Last year saw a ~60% combined increase at prices between $24 and $41. The stock currently trades at $50.55. There was a ~4% trimming this quarter.CNX Resources (CNX) previously Consol Energy: CNX is a fairly large (top three) ~5% stake purchased in Q3 2014 and built up over the next several quarters. The three quarters thru Q4 2016 had seen a ~50% combined reduction at prices between $8 and $19. The pattern reversed in Q1 2017: ~50% increase at prices between $12 and $16.50. The stock currently trades at $14.79. For investors attempting to follow Einhorn, CNX is a good option to consider for further research. Greenlight controls ~8% of CNX Resources.Note: The prices quoted above are adjusted for the coal spinoff (Consol Energy – CEIX) in November 2017.Perrigo plc (PRGO): The ~4.5% PRGO position was purchased in Q1 2017 at prices between $66 and $87 and increased by ~50% the following quarter at prices between $66 and $76.50. There was another ~15% stake increase last quarter. The stock is now at $89.65. This quarter saw a ~2% trimming.Tempur Sealy International (TPX): A very small 0.34% of the portfolio stake in TPX was purchased in Q2 2017. Last quarter saw a whopping 600% increase to a fairly large position at a cost-basis of $56.11. This quarter saw a ~30% selling at prices between $51 and $68. The stock is now at $56.16 and the stake is at 3.22% of the portfolio.Note: Greenlight has a 5.2% ownership stake in TPX.Altaba Inc. (AABA) previously Yahoo: The 2.81% AABA stake saw a huge ~120% stake increase in Q1 2016 at prices between $27 and $37. The stock is currently at $74.40. This quarter saw a ~50% reduction at prices between $65.40 and $73. Greenlight realized huge gains.Micron Technology (MU): MU is a 2.54% position purchased over the first three quarters of 2017 at a cost-basis of $29.11. This quarter saw a one-third selling at prices between $39 and $50. The stock is now at $43.50.Note: In the 2013-15 timeframe, Greenlight had a successful roundtrip (mid-teens IRR) on Micron.Adient plc (ADNT): ADNT is a ~2.5% portfolio stake that saw a ~300% increase last quarter at prices between $64 and $86. The stock is now at $63.44. There was marginal trimming this quarter.Conduent Inc. (CNDT): Conduent, the Xerox spinoff started trading in December 2016 at ~$16 and currently goes for $15.99. The 1.27% position was established in Q1 2017 at prices between $13.25 and $17.25. This quarter saw a ~27% selling at prices between $15.05 and $16.30.Note: Conduent’s business is identical to Affiliated Computer Services which Xerox (XRX) had acquired in 2010.Chemours Co. (CC):  CC is currently a ~1% portfolio stake. Greenlight’s cost-basis on CC is $6.58.  The last five quarters saw the position sold down by ~94% at prices between $15 and $57. The stock is now at $48.91. Greenlight is harvesting huge gains.Note: The original buy thesis was based on earnings reaching ~$3 in 2018. Greenlight also believed that the litigation threat was overstated.Childrens Place (PLCE), DSW Inc. (DSW), Dillard’s (DDS), Clipper Realty (CLPR), Gap Inc. (GPS), and Varex Imaging (VREX): These very small (less than ~1% of the portfolio each) positions saw reductions this quarter.Note: Varex Imaging is a spinoff from Varian Medical Systems (VAR) that started trading at ~$27 in January 2017 and currently goes for $37.10. Clipper Realty, the New York focused residential REIT had an IPO in February 2017 at ~$13.50 per share. The stock is currently at $8.06.Kept Steady:Apple Inc. (AAPL): AAPL is a top five 6.74% position. The stake was first purchased in the low-40s price-range in 2010. It has seen several profitable trades over the years. Recent activity follow: Q1 2016 saw a ~30% increase at prices between $93 and $110. The next two quarters had seen a combined ~35% selling at prices between $90 and $116. The pattern reversed again in Q4 2016: ~12% increase at prices between $106 and $118. There was a roughly one-third reduction in Q1 2017 at prices between $116 and $144 and that was followed with a ~45% selling last quarter at prices between $143 and $164. The stock currently trades at $173.Green Brick Partners (GRBK): The ~5% of the US long portfolio GRBK stake was acquired as a result of BioFuel Energy’s JGBL Builder Finance acquisition and rename transaction. The deal closed (October 2014) with Greenlight owning 49% of the business. David Einhorn was appointed Chairman of the Board following the transaction.Consol Coal Resources LP (CCR), Exela Technologies (XELA), and Venator Materials plc (VNTR): These are very small (less than ~1% of the portfolio each) positions kept steady this quarter.Note 1: Greenlight controls ~35% of CCR.Note 1: Venator Materials plc, a spinoff from Huntsman (HUN) started trading in August 2017 at ~$20.50 and currently goes for $21.70.Note 2: In July 2017, Quinpario Acquisition (a SPAC that had an IPO in January 2015) merged with HOV LLC and Novitex Holdings (financial technology services provider) to form the new entity Exela Technologies. Greenlight has a 5.6% ownership stake in Exela.Per Greenlight’s Q4 2017 letter, the top disclosed long positions were AerCap, Bayer, Brighthouse Financial, General Motors and gold. In addition to partner stakes, the fund also invests the float of Greenlight Capital RE (GLRE). The spreadsheet below highlights changes to Greenlight’s 13F stock holdings in Q4 2017:: Q3 2017 return is 6.2% and YTD 3.3% compared to 4.5% and 14.2% for the S&P – strong long portfolio (positive return & alpha), good shorts (negative return but good alpha), and mildly positive macro. Bubble basket shorts – AMZN, TSLA, NFLX – suspects a flawed valuation model in play – basically, they are disrupting profit steams of competition but that does not mean those streams are theirs. Winners & Losers – CNX, GM, & Uniper were winners while the CAT short & MYL were losers. Commentary: CNX - $16.94 – still thinks the coal separation should happen by EOY but surprised the stock hasn’t moved in anticipation, anticipating good near-term prospects – they announced a share repurchase plan as well after many years, GM – some commentary on their previous proxy contest and the virtues of their preferred dividend share plan – compared it to the $1B preferred shares they issued at 5.75% which quickly traded up to yield 5.25%, UN01 – takeover rumors (E.on), etc. the reason for the 41% increase in Q3, CAT Short – lost money as the company raised earnings from $3.75 to $5 – market is giving a PE of 26 which assumes mid-cycle – they disagree. MYL - $31.37 – Trades at 7x this-year’s and 6x next-year’s earnings – likely that from now on, projections will be met and they are excited about the company’s pipeline of complex generics, NEW LONGS: HPE – purchased at $13.29 – believes the company has earnings power in the $1.40-$1.70 range in the next few years (earnings depressed currently due to higher input costs & separation related expenses – has scope for cost reduction). MU – purchased at $29.21 - previously had exited at $22.14 for a mid-teens IRR – currently earning more than twice as much as the previous cycle peak – there are structural improvements in the DRAM business which is underappreciated even at the current price of ~$39.50. TPX – purchased at $56.11 – shares had fallen precipitously following termination of Mattress Firm contract which was 21% of business – they believe, the market will be recaptured at higher margins eventually – earnings should be north of $6 by 2019-20 compared to $4.05 consensus for 2019. EXITS: Axiar Petrimonia – Spanish property developer – realized high-teens compounded return & exited as shares approached fair value. BBY Short – exited at a loss – high-end computing & Nintendo Switch led them to some of its best sales in years while they anticipated weakness in TV & gaming. Calpine – Exited with a modest gain as it is getting acquired by Energy Capital Partners – they believe buyer is getting the better deal. PVH – Closed profitably – shares rebounded as market finally gave credit for excellent brand management & growth in Europe and Asia. Largest Disclosed Longs: AerCap, Bayer, CONSOL Energy, General Motors and gold. Long/Short Ratio: The Partnerships had an average exposure of 118% long and 73% short.Regulatory Filings thru 11/15/2017: 13D/A – 10/6/2017 – CNXC – 5.5M shares – 35% of business."