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David Einhorn's Top 4 Sells in 3rd Quarter

- By James Li

David Einhorn (Trades, Portfolio), chairman of Greenlight Capital Re Ltd. (GLRE), disclosed this week his top four sells for the third quarter were Mylan NV (MYL), General Motors Co. (GM), Perrigo Co. PLC (PRGO) and CNX Resources Corp. (CNX).


Einhorn said during Greenlight's earnings call the investment portfolio reported a loss of 8.4%, driven primarily by "losses from short positions" like Tesla Inc. (TSLA). Despite this, gains stemming from the "relative outperformance of value stocks" partially offset the loss.

Mylan

Einhorn said Greenlight exited its Mylan position "with a small loss" primarily due to higher-than-expected declines in U.S. Generics. The investor sold 6,859,000 shares for an average price of $37.54, trimming 7.90% off the equity portfolio.

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Mylan develops, licenses, manufactures, markets and distributes generic and over-the-counter products in a variety of dosage forms and therapeutic categories. Although GuruFocus ranks the company's profitability 7 out of 10, the website also lists several warning signs, which include declining profit margins and higher asset growth compared to revenue growth.

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Richard Pzena (Trades, Portfolio)'s Pzena Investment Management Inc. (PZN) and the Vanguard Health Care Fund (Trades, Portfolio) have the top two holdings in Mylan according to guru trades data.

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General Motors

Einhorn sold 6,297,800 shares of GM, trimming the position 29.68%. The transaction relegated GM to Einhorn's second-largest holding, behind Brighthouse Financial Inc. (BHF). Shares of the Detroit-based auto manufacturer averaged $36.84 during the quarter.

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Einhorn said on the call the long position in GM declined 14.5% on several factors, which included concerns of the cyclicality of the auto business and "marginal reduction in [the company's] forecasts due to higher steel costs and adverse currency movements." Despite this, GM reported strong sales growth during the quarter and announced a partnership with Honda Motor Co. (HMC)(TSE:7267) to develop an all-purpose autonomous vehicle for GM Cruise. According to the agreement terms, the Japanese auto manufacturer expects to invest $2.75 billion to the partnership throughout the next 12 years.

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Perrigo

Einhorn axed 88.13% of his holding in Perrigo, selling 1,632,919 shares for an average price of $75.07. The investor pared 3.80% of his equity portfolio with this transaction.

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A major infant formula manufacturer, Perrigo operates four business segments: consumer health care, branded consumer health care, prescription pharmaceuticals and active pharmaceutical ingredients. GuruFocus ranks the company's profitability 7 out of 10 on several positive investing signs, which include a strong Piotroski F-score of 8 and a dividend yield close to a 10-year high. Despite this, operating margins are outperforming just 63% of global competitors and have contracted approximately 7% per year over the past five years.

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CNX Resources

Einhorn sold 4,125,000 shares of CNX Resources, trimming the position 54.10%. Shares averaged $15.87 during the quarter; the investor pared 3.80% of his equity portfolio with this transaction.

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Pittsburgh-based CNX Resources explores and produces natural gas primarily in the major shale formations in the Appalachian Basin. GuruFocus ranks the company's financial strength 4 out of 10: although the company's Piotroski F-score ranks 7 out of 9, its Altman Z-score of 1.59 suggests moderately severe financial distress while the Beneish M-score of -1.15 suggests possible earnings manipulation.

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See also

Einhorn sold his 1,603,600 shares of Twitter Inc. (TWTR), a company that traded 16% higher on Oct. 25 on strong revenue and daily active user growth. Shares of Twitter reached an intraday high of $33.38 that day; the stock currently trades around $33.60. Despite this, Twitter is still trading approximately 4.80% below its third-quarter average price of $35.40.

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Einhorn's other key sells for the quarter include Berkshire Hathaway Inc. (BRK-A)(BRK-B) CEO Warren Buffett (Trades, Portfolio)'s largest holding Apple Inc. (AAPL) and Appaloosa fund manager David Tepper (Trades, Portfolio)'s largest holding Micron Technology Inc. (MU).

Disclosure: No positions.

Read more here:

  • What Went Wrong for This Fund Manager?
  • David Einhorn Buys Altice USA, Wins on Tesla and Brighthouse in 3rd Quarter
  • Tesla's 3rd Quarter Is as Good as It Will Ever Get


This article first appeared on GuruFocus.