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Top Buys in the Last Quarter from David Einhorn

December 28, 2011 | About:
Mara Kohn

Mara Kohn

4 followers
David Einhorn is president and co-founder of Greenlight Capital, a long-short value-oriented hedge fund. Since its inception, Greenlight has generated greater than a 21 percent annualized net return for its partners.

Which is David Einhorn strategy? He believes an investment approach emphasizing intrinsic value will achieve consistent absolute investment returns and safeguard capital regardless of market conditions. Einhorn has made his fame for his long term performance and his successful short selling.

Mark Coffer, an S&P analyst pointed out that “Einhorn is the best-known value investor in the game today. His activism and will to take positions in the company has turned him into a role model.”

Apart from Greenlight Capital, David also serves on the boards of Hillel: The Foundation for Jewish Campus Life, The Michael J. Fox Foundation for Parkinson’s Research and the Robin Hood Foundation.

Here are some of his top buys:

Marvell Technology Group Ltd. (MRVL): Marvell Technology designs integrated circuits primarily for data storage, networking, and communications. It is a key supplier to hard disk drive makers. In addition, it has diversified to supply chips to the networking and wireless handset industries. Its Wi-Fi chips are also used in consumer devices and gaming systems to connect users to the Internet. Marvell outsources its production to third-party foundries.

Marvell is financially healthy. As of April, it had no debts and $2.3 billion in cash and investments.

General Motors Co. (GM): General Motors Company emerged from the bankruptcy of General Motors Corporation (old GM) in July 2009. GM has 12 brands and operates under five segments: GM North America, GM Europe, GM South America, GM International Operations and GM Financial.

Financially speaking, GM is recovering from the 2009 low in the sale of vehicles. Higher prices allow GM to get more margins per vehicle. Indeed, new models such as Buick's LaCrosse and Regal and the Chevrolet Cruze have been very successful and models like Chevrolet's Malibu and Sonic show that GM can make a vehicle to compete directly with the models produced by Japanese and European automakers.

GM already is a top player in critical emerging markets such as Brazil and China. It sells nearly 70% of its vehicles outside North America.

CBS Corporation B (CBS): CBS' television assets include the CBS television network, 30 local TV stations, and 50% of CW, a joint venture between CBS and Time Warner. The company also owns Showtime, CBS Radio, CBS Outdoor and Simon & Schuster.

The CBS television network has generated strong audience ratings relative to its peers for the last five years. The success and stability of the network is attractive to advertisers.

The nation's largest pay-television distributor paying up for a content company demonstrates that quality content is tough to build from scratch.

Apple Inc. (AAPL): Apple designs consumer electronic devices, including PCs (Mac), tablets (iPad), phones (iPhone), and portable music players (iPod). In terms of music, its iTunes online store is the largest music distributor in the world. In terms of tablets and phones, it rents TV shows and movies and sells applications for its iPhone and iPad. That is not all. In early 2011, Apple launched the Mac app store, an online store that sells first- and third-party applications for Mac desktop and notebook computers.

Apple's products are not only sold through company-owned stores and third-parties, they are also distributed online.

Unlike hardware-focused consumer electronics firms, Apple's expertise in software and content provides a bridge from one generation of devices to the next.

Financially speaking, the company has $26 billion in cash and short-term investments, holds another $56 billion in long-term investments, and generated more than $33 billion in free cash flow during fiscal 2011. It carries no debt.

CareFusion Corp. (CFN): CareFusion has two operating segments: critical care and medical technologies. The critical-care segment manufactures and markets infusion pumps, medication dispensers, ventilators and respirators. The medical technologies and services segment provides infection control products and surgical instruments.

The company operates in 20 countries, and 25% of its sales come from international transactions.

In terms of quarter results, the company currently has almost no net debt, and strong free cash flow should consistently add cash to the balance sheet. CareFusion ended 2010 with $1 billion in cash on the balance sheet and interest expense coverage over 5 times.

CareFusion's high-priority devices and recurring consumables revenue make the firm less sensitive to hospital spending cycles. As the market leader in many of its product categories, CareFusion has a large installed base of devices. Since customers rarely switch brands, CareFusion can easily defend its market position.

Rating: 3.5/5 (13 votes)

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