Why Did David Einhorn Drop Microsoft and J.C. Penney?
Microsoft (NASDAQ:MSFT) and J.C. Penney Co. (NYSE:JCP) are no longer on prominent hedge-fund manager David Einhorn’s radar, the Wall Street Journal reports. According to an investor letter, Einhorn grew weary with Microsoft after a 7-year-old investment while pulling out of a profitable bet against J.C. Penney.
The letter to investors also showed that Einhorn’s Greenlight Capital Inc. underperformed the broader market with a 1.2 percent gain, net of fees and expenses, during the quarter. For the year, the fund is up 7.1 percent. Overall, the firm oversaw $8.8 billion in assets at the start of the year.
Einhorn has had shares of Microsoft since 2006, but the firm decided to exist the investment when shares gained after an analyst’s upgrade. He wrote in the letter that along with the “flop” of Windows 8, a “decade of mismanagement has put Microsoft at risk of becoming a shrinking company.”
He also made a comparison to the famous New York Yankees baseball player Alex Rodriguez, who’s now mired in countless controversies. “In 2006 we compared Microsoft to A-Rod, which was a compliment at the time,” he said. “In 2013, the comparison is still apt, but it is no longer a compliment,” referring to the mounting problems Rodriguez is facing as allegations about steroid use continue to surface.
Einhorn’s criticism of Microsoft goes back at least two years when he was throwing barbs at CEO Steve Ballmer. At the Ira Sohn investment conference, Einhorn said that Microsoft had “Charlie Brown” management and said that Ballmer’s “continued presence is the biggest overhang on Microsoft stock.” Evidently, he had finally seen enough.
J.C. Penney, on the other hand, was the firm’s most profitable short, according to Einhorn. The retailer struggled mightily this year as Ron Johnson was brought in to try and turn the company around. Einhorn then sold once Johnson left the company in April.
Other notable stocks that Greenlight closed include CBS Corp. (NYSE:CBS), Sprint (NYSE:S), Seagate Technology Plc (NASDAQ:STX), and Republic Airways Holdings Inc. (NASDAQ:RJET). Shorts included Essex Property Trust Inc. (NYSE:ESS), Dick’s Sporting Goods Inc. (NYSE:DKS), Aruba Networks Inc. (NASDAQ:ARUN), and Boston Properties Inc. (NYSE:BXP)