David Einhorn (Trades, Portfolio)'s Greenlight Capital disclosed an equity portfolio valued at some $6.03 billion as of the end of the third quarter. The equity portfolio is mainly invested in Technology (35%), Consumer Discretionary (21%) and Industrials (19%) stocks.
His three largest positions are: Apple (AAPL, Financial), General Motors (GM, Financial) and Michael Kors (KORS, Financial), representing 20.5%, 8.1% and 4.9%. The guru increased his position in the three stocks. In Apple, he increased his exposure by 53%, in General Motors by 12% and in Michael Kors by 95% as of the end of September.
Apple's catalysts
No one can doubt the company's experience in integrating hardware with software and those with services and/or with apps. Although there exists an intense competition, Apple is a future gainer in the stock market as well as in the real economy market.
When looking at Apple's stellar product iPhone, we see future growth in the U.S. and emerging markets. Although an iPhone 6s can cost up to $1,500 in a South American country, the degree of loyalty is high. In those countries, the domestic currencies were devalued, which means that they are expensive, but they are still sold at Christmas. It's hard to imagine that this company will have no growth in the future.
Moreover, we can mention its relative valuation. The company trades at a trailing P/E of 12.41 which is close to a two-year low, and it trades at a P/B ratio of 5.05x that is close to a one-year low and a P/S ratio of 2.82x that is close to a two-year low. This actual pricing is probably among the reasons several hedge fund managers were bullish on the stock. Larry Robbins (Trades, Portfolio), John Griffin (Trades, Portfolio) and Richard Snow (Trades, Portfolio) have initiated new positions in the stock, with 301,778, 2,250,000 and 66,077 shares.
General Motors' efficiency
This is another great player in its industry, having car models with great quality. But apart from cars, the firm has its truck models that lead this segment as well.
Looking at the big picture, the European market is unpredictable, but the U.S. market is stable. Although competitors such as Hyundai and Volkswagen (VOW, Financial) may gain some share in the future, General Motors should benefit from future expansion or, if this is not the case, setting higher prices in certain segments and obtaining a higher margin per vehicle. Margins can also be explained by the significant reduction in labor costs.
Michael Kors' financial health
Last but not least, Michael Kors is trading at the lowest multiples in its history, making it attractive for investors. Moreover, the company has provided an auspicious guidance for its revenue between $4.6 billion and $4.65 billion for fiscal 2016 and diluted EPS of $4.38 to $4.42. Furthermore, this retailer has an impressive generation of free cash flow and has a current ratio of more than four times.
Final comment
These three bets are good opportunities with upside potential in the long term. Mr. Market is going to make a correction on the multiples we have seen.
Disclosure: As of this writing, Omar Venerio did not hold a position in any of the aforementioned stocks.
