David Einhorn is having a mixed June. Last night, the star hedge fund manager and professional poker player, was knocked out after only 45 minutes of play in a one million dollar charity tournament. The value-oriented hedge fund manager lost with three jacks to a straight. However, on the investment front, Einhorn is having a great 2014.
According to results just released by David Einhorn’s Greenlight Capital Re, Ltd. (NYSE:GLRE), the reinsurance vehicle posted investment returns of 1.7% in the month of June. For the second quarter of 2014, GLRE has returned 8.1%, and 7.3% for the year, ahead of the S&P 500’s return of approximately 6% and well ahead of the average hedge fund which is up just 2.36%, according to recent data compiled by Barclay Hedge.
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Einhorn top holdings
How did Einhorn do it? According to data from GLRE, the five biggest holdings are currently -Apple Inc. (NASDAQ:AAPL), gold, Micron Technology, Inc. (NASDAQ:MU), Marvell Technology Group Ltd. (NASDAQ:MRVL), Resona Holdings Inc(TYO:8308) and Sunedison Inc(NYSE:SUNE).
Apple, which has long been one of Einhorn’s longest positions, returned 16% in H1 including a June return of approximately 2.8%. Micron, another large holding, is up nearly 55% for the year, after a 15%+ return in June. Gold the precious metal favored by Einhorn is having a good year, up nearly 10%. Marvell, yet another big stake, is approximately flat for the year, after an 8% decline in June.
Einhorn on SUNE and Resona
Two positions show up among Einhorn’s top holdings, which while not new, have not yet appeared among the largest stakes. In his Q1 letter to investors, Einhorn disclosed a stake in Sunedison Inc (NYSE:SUNE) with an average purchase price of $15.55, compared to the current closing price today of $22.60 a share. In the letter Einhorn noted:
The company has now exited the solar module assembly business and is in the process of monetizing its semiconductor wafer business through an IPO. Later this year, we expect the company will IPO a newly-created Yieldco, which will house its most attractive solar projects rather than selling them to third parties. NRG Yield Inc. is a comparable company that trades at 12x EBITDA and has a 3% dividend yield. Were Yieldco to trade at 9x EBITDA and a 5% dividend yield it would imply a value for the solar business of ~$34 per share. SUNE expects to run its development business close to break even in future periods. Adding in the value of the soon-to-be IPO’ed semiconductor business and subtracting a modest amount of corporate net debt would suggest a sum of the parts value for SUNE of ~$35 per share.
Einhorn states in the same letter that he opened a position in Resona, the largest Japanese regional bank, at a price of ¥547, representing 0.8x book value and 8x earnings. Shares of the bank are currently trading at ¥593.
It is unclear whether the equity stakes in SUNE and Resona Holdings now are among GLRE’s top holdings because Einhorn purchased more shares of them, they appreciated in value, he sold shares of other companies, or a combination. Einhorn noted:
Resona was formed through the 2002-2003 merger and recapitalization of three local banks in the Tokyo and Osaka regions. As part of that recapitalization, the Japanese government bought a majority equity stake. Under new management, the bank cleaned up its balance sheet, began paying back the government stake, and has been profitable every year since, reaching a 13% ROE last year. In 2013, management announced a five-year plan to buy out the remaining government shareholding. Due to stronger than expected earnings, that plan is well ahead of schedule, and the company is buying back stock from the government at very attractive valuations. The accretion from the buyback does not appear to be reflected in analyst models. With the more volatile international Japanese banks trading at 9x EPS, and its peer regionals at 13x EPS, Resona is cheap on both an absolute and relative basis.
Currently GLRE’s investment portfolio is approximately 114% long and 66% short. All exposure information is calculated on a delta adjusted basis and excludes credit default swaps, interest rate swaps, sovereign debt, currencies, commodities, and derivatives on any of these instruments.
Seperately, Dan Loeb’s reinsurer, TPRE reported H1 return of 5.5% and a June return of 1.7%, matching Einhorn.
More information will be revealed about both famous investors in Q2 letters, so make sure to check back.
A spokesperson for Greenlight declined to comment.
