"Tracking David Einhorn’s Portfolio – Q3 2018 Update"
"David Einhorn's 13F stock portfolio value decreased from $3.14B to $2.37B this quarter.Greenlight's long/short ratio is at 106% long and 74% short compared to 96% long and 75% short last quarter.Greenlight decreased General Motors and dropped Mylan during the quarter.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 11/14/2018. Please visit our  series for an idea on his investment philosophy and our  for the fund’s moves during Q2 2018.Greenlight Capital’s 13F portfolio value stood at $2.37B this quarter. It is down ~25% compared to $3.14B as of last quarter – the portfolio has become much more concentrated with total positions at 20 compared to 29 in the previous quarter. The long/short ratio shifted significantly to the long side: 106% long and 74% short – net exposure at 34% compared to 21% as of Q2 2018. The top five holdings represent ~70% of the 13F portfolio.Einhorn’s Q3 2018 letter reported that the fund returned negative 25.7% YTD. This is compared to positive 10.6% for the S&P 500 Index. The letter did not attempt to explain the dismal performance but said they believed their longs were very cheap and shorts incredibly expensive on an absolute basis. Greenlight maintains a hefty short book. The eleven-year short of Martin Marrietta (MLM) along with a more recent short of Transdigm (TDG) were covered at a loss during the quarter. The letter has a long discussion on their short exposure to Tesla (TSLA) – they see parallels to the Lehman debacle from a decade ago - Musk’s erratic behavior, attacking the shorts, and the going private card. To learn about David Einhorn and the perils of shorting, check-out his “”.Note: In the Sohn Conference in April, Einhorn disclosed they were short Assured Guaranty (AGO).New Stakes:Altice USA (ATUS) and Seadrill Ltd. (SDRL): ATUS is a 2.22% portfolio stake established this quarter at a cost-basis of $18.38 compared to current trading price of $17.68. The ~1% SDRL position was established as the business exited from Chapter 11 bankruptcy on July 2nd. It is likely that Greenlight held debt that got equitized. The stock is at $16.75.Tractor Supply (TRCO), Sherwin Williams (SHW), and Michael Kors (KORS): These are minutely small (less than 0.20% of the portfolio each) positions purchased this quarter.Stake Disposals:Mylan NV (MYL): MYL was a large (top three) ~8% of the portfolio position as of last quarter. It was established in Q4 2015 at a cost-basis of $45.32. Next year saw a huge stake built up at prices between $34 and $50. Q2 2017 saw another ~23% increase at prices between $36.50 and $40. The position was disposed over the last three quarters at prices between $35.50 and $39.50. The stock currently trades at $34.92.Note: Lower price points for new products and overall decline of the generics industry prompted the exit at a loss.Apple Inc. (AAPL): AAPL position was first purchased in 2010. Last significant buying happened in Q4 2016: ~12% increase at prices between $106 and $118. There was a roughly one-third reduction next quarter at prices between $116 and $144 and that was followed with a ~45% selling in Q3 2017 at prices between $143 and $164. Last two quarters saw the position almost sold out at prices between $155 and $194. The remainder stake was disposed this quarter. The stock currently trades at ~$194.Note: Their last shares were sold at $228. Overall, they had a $1B profit since their original purchases at $36 in 2010. The position yielded a 26% IRR. They sold as their differentiated thesis from 2011 (the core idea was that iPhone was not a commodity piece of hardware) has become the consensus view now. They are also somewhat worried about Chinese retaliation against America’s trade policies.Conduent Inc. (CNDT): Conduent, the Xerox spinoff started trading in December 2016 at ~$16 and currently goes for $13.34. The position was established in Q1 2017 at prices between $13.25 and $17.25. Q4 2017 saw a ~27% selling at prices between $15.05 and $16.30 and that was followed with a ~60% reduction last quarter at prices between $17.50 and $21. The remaining ~1% position was disposed this quarter.Note: Conduent’s business is identical to Affiliated Computer Services which Xerox (XRX) had acquired in 2010.Micron Technology (MU): A fairly large position in MU was purchased over the first three quarters of 2017 at a cost-basis of $29.11. Q4 2017 saw a one-third selling at prices between $39 and $50. Last quarter saw the position almost sold out at prices between $46 and $63 and the remainder stake was disposed this quarter. The stock is now at $39.44.Note: The position returned 66% over the last year. Sensing DRAM pricing weakness prompted the exit. Greenlight also had a successful roundtrip (mid-teens IRR) on Micron in the 2013-2015 timeframe.Twitter Inc. (TWTR): The 2.23% TWTR position was purchased in Q4 2017 at an average cost of $21.59. The position saw a ~10% trimming in Q1 2018 and a ~36% reduction last quarter at prices between $27.50 and $47. The disposal this quarter was at prices between $28 and $47. The stock is now at $33.67. Overall, the position was exited at a whopping ~78% gain over a six-month holding period.Clipper Realty (CLPR), DSW Inc. (DSW), and Venator Materials plc (VNTR): These very small (less than ~1% of the portfolio each) positions were reduced last quarter and disposed this quarter.Note 1: Clipper Realty, the New York focused residential REIT had an IPO in February 2017 at ~$13.50 per share. The stock is currently at $13.17.Note 2: Venator Materials plc, a spinoff from Huntsman (HUN) started trading in August 2017 at ~$20.50 and currently goes for $5.60.Gap Inc. (GPS), Dollar General (DG), TJX Companies (TJX), AutoZone (AZO), Dollar Tree (DLTR), and Best Buy (BBY): These minutely small (less than ~0.15% of the portfolio each) stakes established last quarter were disposed this quarter.Note: Gap and Best Buy have seen previous roundtrips.Stake Increases:IAC/InteractiveCorp (IAC): IAC is a ~4% of the portfolio stake established in Q1 2018 at prices between $129 and $165 and increased by ~31% last quarter at prices between $131 and $165. There was another one-third increase this quarter at prices between $146 and $223. The stock currently trades at ~$183.Note: IAC had a previous round-trip: a long-term stake from Q1 2013 was disposed in Q2 2017 at substantial gains.Adient plc (ADNT): ADNT is a ~2% portfolio stake that saw a ~300% increase in Q3 2017 at prices between $64 and $86. There was a roughly one-third selling in Q1 2018 at prices between $57.50 and $84. Last quarter saw another ~50% reduction at prices between $47.50 and $66. There was an about turn this quarter: position almost doubled at prices between $38 and $51. The stock is now well below that range at $23.96.Stake Decreases:General Motors (GM): GM is Greenlight’s second-largest position at ~21% 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 increased by around four-times during Q4 2016 & Q1 2017 at prices between $31 and $38.50. The next three quarters saw a ~65% reduction at prices between $32.50 and $46.50. YTD has seen another ~42% selling at prices between $33.50 and $45. GM currently goes for $35.75.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 five) ~9% 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. Last four quarters have seen a ~70% reduction at prices between $49 and $57.50. The stock currently trades at $50.54.Voya Financial (VOYA) previously ING US: The fairly large 4.30% 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 $44.48. Last three quarters have seen a ~65% selling at prices between $46 and $55. Greenlight is harvesting gains.Altaba Inc. (AABA) previously Yahoo: The 4.24% AABA stake saw a huge ~120% stake increase in Q1 2016 at prices between $27 and $37. The stock is currently at $63.59. Q4 2017 saw a ~50% reduction at prices between $65.40 and $73 and that was followed with a ~20% selling next quarter at prices between $69 and $80. There was a ~17% further reduction this quarter at prices between $64 and $77.50.CNX Resources (CNX) previously Consol Energy: CNX is a 2.11% 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 $14.40. Last three quarters have seen a ~80% selling at prices between $12 and $18.Note: The prices quoted above are adjusted for the coal spinoff (Consol Energy – CEIX) in November 2017.Perrigo plc (PRGO): A fairly large ~4% portfolio position was built during the first three quarters of 2017 at prices between $66 and $84. The stock is now at $63.27. YTD has seen a ~90% selling at prices between $69 and $95. The stake is now very small at 0.66%.Medicines Company (MDCO): The small ~1% MDCO positon saw a ~5% trimming this quarter.Kept Steady:Brighthouse Financial (BHF): BHF is now the largest 13F stake at 21.63% of the portfolio. The position was established in Q3 2017 and increased by ~60% in the following quarter at an overall cost-basis of $57.92. The stock is currently well below that at $39.58. For investors attempting to follow Greenlight, BHF is a good option to consider for further research. There was a ~5% stake increase last quarter.Note: BHF is a spinoff of MetLife’s (MET) U.S. Retail business (annuities and life insurance) that started trading in July last year.Green Brick Partners (GRBK): The large (top three) ~10% of the 13F 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.Ensco plc (ESV): ESV is now a large (top five) 7.13% portfolio position. It was established in Q4 2017 at a cost-basis of $5.72. There was a stake doubling in Q1 2018 at prices between $4.34 and $7.43 and the stock is now at $6.40.Tempur Sealy International (TPX): A very small 0.34% of the portfolio stake in TPX was purchased in Q2 2017. The following quarter saw a whopping 600% increase to a fairly large position at a cost-basis of $56.11. Q4 2017 saw a ~30% selling at prices between $51 and $68 and that was followed with a ~70% reduction next quarter at prices between $44 and $64.50. The stock is at $49.11 and the stake is now very small at ~1.75% of the portfolio.Consol Coal Resources LP (CCR) and Exela Technologies (XELA): These two positions were kept steady this quarter. Greenlight controls ~35% of CCR. 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 Exela Technologies. Greenlight has a 5.6% ownership stake in Exela.Per Greenlight’s Q3 2018 letter, the top disclosed long positions were AerCap, Brighthouse Financial, General Motors, Green Brick Partners 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 Q3 2018:Regulatory filings thru 9/1/2018: Form 4 & 13D/A – 7/5 – GRBK – 24.13M shares – 47.6% of business - internal reallocation of shares, Form 4 – 7/5 – CCR – 5.49M shares – 34.5% of business - internal reallocation of shares,: Performance – negative 18.3% YTD compared to 3.4% for S&P 500 index. BHF - $57.92 cost-basis – thinks it is deeply undervalued trading at ~37% of BV and 6x earnings. Capital return (dividends) projected to be sooner than the 2020 estimate might turn out to be a catalyst. GM – the Softbank investment should have resulted in a revaluation of shares by ~$11 per share, but instead the stock has been flat. TSLA – second biggest loser in the quarter as it rose ~29% - Musk seems desperate although market has not turned. NFLX – covered at $284 and the stock went up another $100 – helped keep around ~5% of capital. ATHN – not a loser in 2018 despite the rally as they have managed to trade around it – activist willing to buy at ~$160 per share seems just trying to force somebody else to buy them – it may not happen. Have re-shorted it after the rally. Altice Europe – small long position after spinoff at 1.59 Euro, now trades at over double that. Resona Holdings – Japanese bank – EXIT with medium profit after four years. Dillard’s – EXITED after three years with modest profit. Elekta AB – 5-year short covered at small gain. Largest Disclosed Longs: Bayer, Brighthouse Financial, CNX Resources, General Motors, and Gold. Long/Short Ratio: Continuing to reduce exposure. The Partnerships had an average exposure of 96% long and 75% short compared to 111% long and 82% short last quarter."