His modest gains come from his conservative and defensive portfolio, with a small net long position throughout the year and have almost entirely avoided the volatility of the market. He also benefited from the gold positions, as gold appreciated more than 10% in the second quarter.
His short position in Moody’s was a significant winner in the second quarter. The prices of Moody’s shares declined from $29.75 to $19.92. He believes that an eventual legal loss will have a significant negative impact on MCO shares.
David Einhorn is building positions in Barrick Gold, Apple Inc., Ensco Plc, and NCR Corporation. These are the summaries of his commentaries.
Apple Inc. (AAPL)
Apple Inc. is apparently a new position for Greenlight. He said: “While growth over the next few years will certainly be slower than it has been over the last few years, AAPL does not appear to have fully penetrated its market opportunities,” wrote Einhorn, referring to Apple by its stock symbol. “Accordingly, the opportunity to invest in this leading company (with a better financial profile than market participants seem to acknowledge) appears iTtractive”. His fund bought Apple at an average price of $248.09 per share, “representing 15x this year’s estimated earnings net of cash”.
Ensco Plc. (ESV)
Ensco Plc. is another position that Greenlight initiated in the second quarter. The firm acquired more than 5% of the company. Ensco plc, formerly ENSCO International Incorporated, is a provider of offshore contract drilling services to the international oil and gas industry. The Company owns and operates drilling rigs including jackup, ultra-deepwater semisubmersible and barge rigs. According to Einhorn, “ESV was not involved in the horrible accident (oil spill), which should not materially impact the company’s long-term position. ESV has approximately $7 per share in net cash and a tangible book value of $37.5 per share… At the partnership’s average cost of $39.41 per share, we appear to be getting the shallow water fleet at ta low value and the deep water fleet for free.” ESV shares were traded at around $40.65 with a P/E ratio of 8.1 and P/S ratio of 3. The dividend yield of Ensco International Inc. stocks is 1%. Ensco Inc. had an annual average earning growth of 23.9% over the past 10 years. GuruFocus rated Ensco International Inc. the business predictability rank of 3.5-star.
NCR Corporation is a recognized world leader in providing Relationship Technology solutions for the retail, financial, communications, travel and transportation, and insurance markets. NCR Corp. has a market cap of $2.05 billion; its shares were traded at around $12.76 with a P/E ratio of 21.6 and P/S ratio of 0.4. NCR Corp. had an annual average earning growth of 3.7% over the past 10 years. Greenlight established a position in NCF at an average price of $13.58 per share. David Einhorn believes that their ATM and retail businesses are poised for solid growth over the coming years. Their entertainment business is expected to be breakeven in 2011 and profitable thereafter.
Read the complete letter from David Einhorn.