Warren Buffett (Trades, Portfolio) and David Einhorn (Trades, Portfolio) are both value investors whose investing paths have collided in the past.
For instance, Einhorn, founder of hedge fund Greenlight Capital, publicly disagreed with Buffett’s take on gold in 2012. The Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial) chairman and CEO has said he believes the metal holds no true value because it produces nothing. Buffett wrote in a shareholder letter:
“Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce--gold’s price as I write this--its value would be $9.6 trillion. Call this cube pile A.”
“Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?”
Einhorn, who has physical gold as one of the five largest positions in his fund, offered a similar theory by obliquely referring to Buffett and gold in his shareholder letter in 2012 but came to a different conclusion:
"The debate around currencies, cash, and cash equivalents continues. Over the last few years, we have come to doubt whether cash will serve as a good store of value. If you wrapped up all the $100 bills in circulation, it would form a cube about 74 feet per side. If you stacked the money seven feet high, you could store it in a warehouse roughly the size of a football field. The value of all that cash would be about a trillion dollars. In a hundred years, that money will have produced nothing... Alternatively, you could take every U.S. note in circulation, lay them end to end, and cover the entire 116 square miles of Omaha, Nebraska.”
They hold only two stocks in common, General Motors (GM, Financial) and Apple (AAPL, Financial), and have some disagreement about Apple as well.
In 2013, Buffett said in an appearance on CNBC’s Squawk Box that he did not approve of Einhorn’s suit to return some of its cash hoard to shareholders back before the company finally did authorize a dividend.
"I would ignore [Einhorn],” Buffett said. “I would run the business in such a manner as to create the most value over the next five or 10 years. You can't run a business to try and run the stock up every day."
The two mostly parted ways on the stock in recent quarters. Einhorn slashed 71% of his position in the first quarter after cutting 44% in the third quarter of 2017. He ended the first quarter with 628,100 shares, which account for roughly 2.64% of his public portfolio.
Buffett has grown only more confident in the company, adding stock almost every quarter since 2016. Most recently, he increased his Apple position 45% to 239.57 million shares, representing 4.96% of the company and 21.3% of his portfolio. At first quarter-end, it was his largest position.
Buffett:
Einhorn:
Where the two have found some harmony is GM. Or, at least, Buffett has not given a public opinion about Einhorn’s interference in the company. In early 2017, Einhorn floated a plan to divide its share structure into one class that paid a dividend and one that did was tied to growth and earnings. He also nominated directors to its board. Each of his proposals was defeated at the company’s annual meeting last June.
At first quarter-end, Buffett held 50 million shares of the vehicle manufacturer. He last adjusted the holding in the fourth quarter, reducing it by 10 million shares, or 17%. The holding, which represents 3.54% of GM’s shares outstanding, is 0.96% of Buffett’s portfolio.
Einhorn held 22.61 million shares of GM at the end of the first quarter after reducing the position by double-digits for three consecutive quarters. The holding represented 1.6% of its shares outstanding at 20.6% of his portfolio.
Buffett:
Einhorn:
