"Tracking David Einhorn’s Portfolio – Q3 2019 Update"
"David Einhorn's 13F stock portfolio value increased from $1.36B to $1.39B this quarter.Greenlight increased Chemours while decreasing Dillard’s and dropping Hilton Grand Vacations.The largest three positions are at ~49% of the portfolio. As of Q3 2019, the overall portfolio is 116% long and 76% short.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 11/14/2019. Please visit our  series for an idea on his investment philosophy and our  for the fund’s moves during Q2 2019.Greenlight Capital’s 13F portfolio value stood at $1.39B this quarter. It is up ~3% compared to $1.36B as of last quarter. Einhorn’s Q3 2019 letter reported that the fund returned 24% for 2019 YTD. This is compared to 20.6% for the S&P 500 Index. In addition to partner stakes, the fund also invests the float of Greenlight Capital RE (GLRE). Despite the availability of relatively permanent capital from that source, AUM went down from ~$7B to ~$2.5B during 2018 due to huge redemptions. Partly in response, Greenlight reopened the fund to new investors. To learn about David Einhorn and the perils of shorting, check-out his “”.Note: Greenlight maintains a hefty short book. Short stakes currently held include Tesla (TSLA) and Netflix (NFLX). Also, their Q3 2019 letter talked about closing a couple of short positions: Caterpillar (CAT) at a loss and Nvidia (NVDA) at a good profit.New Stakes:Neubase Therapeutics (NBSE): NBSE is a very small 0.55% of the portfolio position established this quarter at prices between $3.15 and $6.60 and the stock currently trades at $5.13. Greenlight controls ~9% of NBSE.Stake Disposals:Hilton Grand Vacations (HGV): HGV was a ~2% of the portfolio stake established in Q4 2018 at prices between $24.50 and $33. There was a ~22% selling last quarter at prices between $25 and $33.50. The remaining position was disposed this quarter at prices between $25.50 and $34. The stock currently trades at $35.15Valaris plc (VAL) previously Ensco Rowan plc (ESV): The VAL stake was established in Q4 2017 at a cost-basis of $22.88. There was a stake doubling in Q1 2018 at prices between $17.36 and $29.72. Q1 2019 saw a reversal: ~25% selling at prices between $14 and $19. The position was reduced to a very small 0.86% portfolio stake last quarter at prices between $6.50 and $17.25. The disposal this quarter was at prices between $3.75 and $9.60. The stock is now at $4.38.Note: The prices quoted are adjusted for the 1-for-4 reverse stock split following the merger with Rowan that closed in April.KAR Auctions (KAR) and Cars.com (CARS): These two positions were purchased last quarter but disposed this quarter. KAR was a 1.63% of the portfolio position established at prices between $19.50 and $25 and disposed at prices between $24.25 and $27.55. The stock is now at $22.50. CARS was a minutely small 0.30% stake.Stake Increases:General Motors (GM): GM is Greenlight’s second-largest position at ~17% of the portfolio. The stake 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 stake 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. Last year saw another ~55% selling at prices between $30.50 and $45 and that was followed with a ~24% reduction in Q1 2019 at prices between $32 and $40. GM currently goes for $36.89. Last quarter also saw a one-third selling at prices between $33 and $40. There was a ~5% stake increase this quarter.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 ~10% stake was disposed in Q1 2014 at an average exit price of $35.76 compared to an average entry price of $23.87.Brighthouse Financial (BHF): BHF is a large (top five) stake at 10.41% 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 $40.43. There was a ~70% selling in Q4 2018 at prices between $29 and $46.50. This quarter saw a ~9% stake increase.Note 1: Greenlight’s Q2 2019 letter highlights flaws in the negative research reports published by Goldman Sachs (GS) and Credit-Suisse (CS): a) the main annuity business is valued as though it is in run-off mode, b) interest-rate sensitivity is over-estimated, and c) cash-flows are currently low because of BHF’s younger book of business. As such, they should get a higher multiple. But the research reports do the exact opposite – lower current cashflows are given a lower multiple.Note 2: BHF is a spinoff of MetLife’s (MET) U.S. Retail business (annuities and life insurance) that started trading in July 2017.Chemours (CC): CC is a large ~7% of the portfolio position established last quarter at a cost-basis of $23.18. This quarter saw a ~75% stake increase at prices between $12 and $23. The stock is currently at $18.43. For investors attempting to follow, CC is a good option to consider for further research.Note 1: Greenlight believes the new bear thesis based on potentially billions in liabilities is flawed. Also, they see $8.50 earnings power for 2021, which is down from the ~$10 estimate they had last quarter.Note 2: Chemours had a very successful roundtrip (~4x returns) during the two-year period that ended in Q1 2018.Adient plc (ADNT): ADNT is a ~4% 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. Next quarter saw another ~50% reduction at prices between $47.50 and $66. There was an about turn in Q3 2018: position almost doubled at prices between $38 and $51 and that was followed with a ~75% increase next quarter at prices between $15 and $38. The stock is now at $20.72. Last two quarters have also seen a 27% stake increase at prices between $14.50 and $26.Stake Decreases:Dillard’s Inc. (DDS): The 1.41% DDS stake was purchased last quarter at $59.20 compared to current price of $76.87. This quarter saw a ~25% selling at prices between $55 and $79.50.Note: Dillard’s has seen previous roundtrips in the portfolio.Kept Steady:Green Brick Partners (GRBK): The large (top three) ~15% 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.AerCap Holdings N.V. (AER): AER is a large (top three) ~13% 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. The four quarters thru Q3 2018 saw the stake reduced by ~70% at prices between $49 and $57.50. The stock currently trades at $59.89. There was a ~9% trimming last quarter.Altice USA (ATUS): ATUS is a 6.58% portfolio stake established in Q3 2018 at a cost-basis of $18.38 and increased by ~40% in Q4 2018 at prices between $14.50 and $19. There was a ~23% selling last quarter at prices between $22 and $25. The stock is currently at $26.88.Consol Coal Resources LP (CCR): CCR is a fairly large 5.33% portfolio stake. Greenlight controls ~35% of CCR. The stake came about as a result of Consol’s coal spinoff in 2015. The stock started trading at ~$15 and currently goes for $9.77.CNX Resources (CNX): CNX is a ~3% 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 four quarters thru Q4 2018 had seen a ~80% selling at prices between $11 and $18. Q1 2019 saw the pattern reverse again: two-thirds increase at prices between $9.75 and $13.50. The stock currently trades at $8.62. There was a marginal further increase last quarter.Note: The prices quoted above are adjusted for the spinoff of Consol Energy (CEIX) in November 2017.Medicines Company (MDCO): The ~2% MDCO stake saw a ~23% selling last quarter at prices between $27.50 and $37.50. The stock currently trades at $51.98.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. The position has wavered. Recent activity follow: Q1 2019 saw a ~50% selling at prices between $41 and $60. That was followed with a ~28% reduction last quarter at prices between $57.50 and $75. The stock is now at $84.97 and the stake at 2.62% of the portfolio.Scientific Games (SGMS): The 2.19% SGMS position was purchased last quarter at prices between $18 and $24 and the stock currently trades at $29.95.Note: On SGMS, Greenlight’s buy thesis is on the belief that after the spinoff of the online social gaming business SciPlay (SCPL), the remaining gaming equipment business (slot machines and instant lottery) trade at a discounted valuation of ~5x cashflow.Echostar (SATS): The 1.69% SATS position was purchased in Q4 2018 at prices between $34 and $46 and it is now at $40.51. Last quarter saw marginal trimming.Voya Financial (VOYA) previously ING US: The 1.24% VOYA position was established in Q2 2013 at a cost-basis of $20.29. 2017 saw a ~60% combined increase at prices between $24 and $41. Last year had seen a ~80% selling at prices between $37 and $55 and that was followed with another ~30% reduction in Q1 2019 at prices between $39.50 and $51.50. Last quarter saw a ~60% further selling at prices between $51 and $56. The stock currently trades at $57.92. Greenlight is harvesting gains.Teekay LNG Partners (TGP): TGP is a very small 0.83% of the portfolio stake established in Q1 2019 at prices between $11 and $15.25. Last quarter saw a ~70% stake increase at prices between $13 and $15.25. The stock currently trades at $15.94.Consol Energy (CEIX): CEIX is a small 0.76% of the portfolio stake purchased in Q4 2018 at prices between $29.50 and $41.50 and increased by ~140% next quarter at prices between $31.50 and $38.50. Last quarter saw another stake doubling at prices between $25 and $34.50. The stock currently trades well below those ranges at $12.26.Exela Technologies (XELA): 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 5.5% ownership stake in Exela. The stock started trading at ~$10 and currently goes for $0.34. The 0.68% portfolio stake saw a ~4% trimming in Q1 2019.The spreadsheet below highlights changes to Greenlight’s 13F stock holdings in Q3 2019:– 7/25/2019 - Performance – Q2 2019 up 5.8% and YTD 17.4% slightly below S&P. Made money in each of Longs, Shorts, and Macro. Some parallels mentioned between pets.com and Chewy (CHWY) a recent IPO with similar business plan to identify overvaluation in growth stocks. BHF – emphasized undervaluation thesis by identifying flaws in bear thesis from GS & CS – a) they value it as though variable annuity business is in runoff although they are bringing in ~$2B of new business per quarter, b) overestimation interest-rate sensitivity, and c) doesn’t account for lifecycle of the annuity business and corresponding capital requirements. Believes they are deeply undervalued at 30% BV and 4x earnings. AGO Short – Contrast compared to BHF – insurance book in decline and the runoff capital is used to repurchase. Also potential $4.5B Puerto Rico exposure. Commentary on new medium-sized positions: CC – Reentered at $23.18 – was their largest winner in 2016-17 – believes the new bear thesis based on potentially billions in liabilities is flawed. Earnings down from $5.78 less around $4 – sees improvement going forward – sees $10 earnings power for 2021, DDS – reentered at $59.20 – owns 90% of its owned square footage and even if retail has more problems, the owned real-estate is valued at $27 per square foot – this is compared to $285 per owned square foot average valuation for Nordstorm, Macy’s, Kohls, JC Penney, Simon, and Seritage. SGMS – gaming equipment company specialized in slot machines and instant lottery -  after SCPL (online social gaming business) spinoff, owns 82% - trading at ~5x cashflow. NEW: macro position against US corporate credit (both investment grade & high yield) – has asymmetric risk-reward and also helps to hedge the cyclical portion of their equity portfolio. EXITS: Deutsche Pfandbriefbank, BT Group, Mowi Short covered, . Exposure: 120% long and 74% short. Largest Positions – AerCap, Brighthouse Finl, Consol Coal Resources, General Motors, and Green Brick Partners. Gold & other macro bets are not included in the largest positions list.Regulatory Filings thru 8/17/2019: 13G – 7/16 – Neubase Therapeutics – NBSE – 1.54M shares – 9% of business."