market folly

In his latest quarterly letter, David Einhorn has revealed some of his hedge fund's latest activity. Greenlight Capital, who manages around $5 billion these days, recently picked up some Ford (F) high-yield bank loans, as well as their revolving bank line. Additionally, they added substantial stakes in EMC (EMC), Harman International (HAR), and Pfizer (PFE). (We originally covered his purchase of Harman here).

Ford Debt

Greenlight managed to purchase Ford's debt at 37 cents on the dollar and started buying in the fourth quarter of 2008. Since their purchases, the debt is up to around 45 cents on the dollar. Ford, unlike General Motors, seems to be complacent in the current market turmoil and doesn't seem to need government aid. Additionally, Ford cut their debt by buying it back at a discount. These development have undoubtedly furthered Einhorn's conviction behind this pick.

Greenlight's Top Positions
1. Criteria Caixa (in Spain)
2. Ford (debt)
3. Gold (GLD)
4. Österreichische Post (in Austria)
5. URS (URS)

Greenlight's position in Ford debt is their second largest long position, behind only a large position in Criteria Caixa. His top holdings list is also rounded out by another foreign name, Österreichische Post, as well as URS, which we had previously in Einhorn's holdings.

Gold

It's also interesting to note that Einhorn continues to hold Gold (GLD). Last quarter, Einhorn's move into Gold was touted all across the media, as we noted in our Greenlight portfolio update. He had never considered himself a 'gold bug,' but could not ignore the future inflationary pressures coming, among other things. Einhorn still holds his large holding in gold, while conversely, his hedge fund compatriot Dan Loeb recently sold out of his gold position, as he mentioned in Third Point's latest investor letter. It's always interesting to see two prominent hedge fund players play the same investment in different manners. Loeb merely sought momentary refuge from market turmoil and brought it up to his fund's largest position for 1 quarter. However, he is now out of the position and is moving on to other things. Einhorn, on the other hand, has seemingly taken a more long-term stance with his gold play, no doubt as a hedge on possible future inflationary pressures and economic turmoil.

EMC & Enterprise IT Spending

Einhorn wrote in his quarterly letter that, "2009 will be an extremely challenging year for all companies exposed to enterprise IT spending. However, we expect EMC to fare better than most given the less volatile nature of storage spending." Einhorn picked up his shares of EMC at an average price of $10.72 and obviously feels it will outperform peers in the sector. He is not alone in this wager, as fellow value-player Bill Ackman has a large EMC stake through his hedge fund Pershing Square.

Additional Movements

Greenlight also made some sales over the past quarter in which they sold Aldar Properties (in Abu Dhabi), Cablevision (CVC), and Dr. Pepper Snapple (DPS). In terms of additional portfolio maneuvering, we also detailed in early April that Einhorn had filed a 13D on MI Developments. And, he has also filed a 13G on Ticketmaster (TKTM).

Performance

In terms of first quarter 2009 performance, Greenlight was up 4.4%. We also noted Greenlight's performance thus far for 2009 in our comprehensive March hedge fund performance update, where they were +4.5% for the month of March.

If you're unfamiliar with Greenlight Capital and Einhorn, then check out his book where he details his battle shorting Allied Capital. Entitled Fooling Some of the People All of the Time, Einhorn takes you into Greenlight's theses formation and investment process. Greenlight is a $5 billion hedge fund and has seen annual returns of over 20%, specializing in spin-offs and value investing. Einhorn appeared in the media frequently in 2008, as he discussed his well-documented short position in Lehman Brothers. And, while that position paid off handsomely for him, it barely offset losses he experienced from other positions. 2008 was a rough year for Einhorn, as it was the first time he's lost money since 1996. Stay tuned, as we'll be presenting Greenlight's long portfolio in its entirety here in two weeks time.