What Moves Did David Einhorn Make in the Fourth Quarter?

Late Tuesday, Greenlight Capital’s David Einhorn issued his quarterly investment letter to shareholders.  The hedge fund manager is well-known for his criticism of Lehman Brothers just before that bank’s collapse, as well as his extensive presentation for shorting Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) shares.

Although volatility (NYSE:VXX) was high in 2011, the markets closed the year relatively flat.  Einhorn explained in the letter that he “found very few places to make money.”  In 2011, Greenlight Capital LP only returned 2.9%.  “Never has so much work gone into making 2%,” Einhorn said in the letter. ”For all its ups and downs, dramatic headlines, and extremely high daily volatility, the market ended the year just about where it started.”

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Even with the broad markets ending flat in 2011, Greenlight Capital had “one of the most profitable shorts in the history” of its funds.  The great short call was First Solar, Inc. (NASDAQ:FSLR).  Shares of the solar energy company plummeted 74 percent in 2011.  However, Einhorn goes on to explain in the letter that he has covered his short position, which appears to be another well-timed trade as First Solar shares have increased …

27 percent in 2012.  Einhorn also covered his short position in Diamond Foods Inc. (NASDAQ:DMND).  Shares of the snack company fell almost 40 percent in 2011, as concerns were raised on how the company accounts for payments to walnut growers.  The accounting investigations have also delayed the company’s purchase of Pringles from Procter and Gamble (NYSE:PG).  Greenlight Capital also closed out positions in Becton, Dickinson & Co. (NYSE:BDX) and CVS Caremark Corp. (NYSE:CVS).

In addition to covering shorts in the fourth quarter, Greenlight Capital also added new long positions in Dell Inc. (NASDAQ:DELL) and Xerox Corp. (NYSE:XRX).  The WSJ reports, “Greenlight was impressed by Dell buying back shares last year while its valuation was relatively low, as well as the company’s effort to broaden its offerings beyond personal computers, according to the letter. Einhorn noted Xerox’s stock repurchasing and its success securing technology outsourcing contracts.”  Greenlight Capital explains they established the Dell position at an average price of $15.53.

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Like other well-known investors such as Warren Buffett (NYSE:BRKA), David Einhorn is bullish on America.  Einhorn writes, “Our current strategy is to own cheap stocks of good businesses, largely in the United States.  We are more net long equities than we have been in some time, as we believe that many stocks have reached a point where they are simply cheap enough to own even if some trouble awaits us.”

To contact the reporter on this story: Eric McWhinnie at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com