It is surprising to read that hedge fund manager David Einhorn is purchasing shares of Research in Motion and Yahoo for his Greenlight Capital group. During the same time, Einhorn sold off his stake in CVS, Marathon Oil Corp, Ingram Micro Inc. and Synaptics Inc.. The fourth quarter filing also showed us that Einhorn’s Greenlight Capital picked up shares in Dell, Xerox, Liberty Media, OmniVision Technologies, Delphi Automotive Plc and CA Inc.
Einhorn cut his equity stake in health care stocks by 3.2% and financials by 5.4%. The hedge fund manager added technology stocks by 8.1% and discretionary spending stocks by 6.5%. David Einhorn transfers his investment perspective to beaten down companies that are believed to eventually come back. This sort of investing is known as deep value investing or contrarian investing. Buying RIM and Yahoo are definitely signs of the contrarian investing philosophy. These two companies are hated by the public yet both have made big changes to management and their business structure that could ultimately lead to big things in the future. At least that is what David Einhorn is betting on. Dell is another perfect example of contrarian investing. The company was once a heavy hitter in the PC industry. However, they have been facing some headwinds with the economy and competition from Apple and HP. However, Dell has strength and a durable brand which should help them move forward and get back to golden era.
However, easily the most surprising development was Einhorn’s RIM purchase. RIM has been under huge scrutiny over the past few years after the company has fallen off the map in the mobile phone industry; losing market share to Android and iPhone in the process. The Blackberry maker has faced many hardships. Management has been changed but so far few signs have progress have been seen from the new leadership. Not to mention its stock has taken a massive dive over the last few years, drawing huge scrutiny from shareholders. Despite these negatives, RIM has a few phones coming out later this year that could revive the brand but so far it seems that may not be the case.
Einhorn’s FOF Re-positions Portfolio, Makes New Seed Investment In Year Marked By “Speculative Exuberance”
It has not just been rough year for David Einhorn's own fund. Einhorn's Greenlight Masters fund of hedge funds was down 3% net for the first half of 2020, matching the S&P 500's return for those six months. In his August letter to investors, which was reviewed by ValueWalk, the Greenlight Masters team noted that Read More
Should you follow Einhorn into RIM? It depends on your risk appetite. Some investors call RIM a value trap, others call it a golden opportunity. It all depends on how you look at it but either way it is a risky bet certainly over the next year or so. I want to see RIM’s new phone line have some success before I feel it is safe to invest in Research in Motion.