Tuesday, August 15, 2006

Greenlight Capital gives Microsoft the Greenlight

David Einhorn, of Greenlight Capital is one of the most highly respected hedge fund managers around, known for his investment skill and his generous charitable giving. David is known for his bearish stance on Allied Capital (ALD) a business development corporation with assets of over $4 billion controls a significant number of portfolio companies in which it provides debt capital. The accounting and valuation of these companies has been called into question by David for some time...his questions continue to be reflected in the put position that he maintains in Allied Capital in his portfolio.

David was featured in Value Investor Insight, one of my favorite publications, back in March 2005 (subscription required.) He described his process in VII, “We take the traditional value investor’s process and just flip it around a little bit. The traditional value investor asks “Is this cheap?” and then “Why is it cheap?” We start by identifying a reason something might be mispriced, and then if we find a reason why something is likely mispriced, then we make a determination whether it’s cheap”. Greenlight also has a private equity side that was featured in TWST (subscription required.)

Greenlight Capital filed its 13-F last night, and it does make for some interesting reading. Please find a table in the following post which outlines changes that have been made between last night’s filing (pertaining to June 30th holdings) and the prior quarter’s holdings:

I have excluded the Allied Capital weighting as it represents a hedged bet of puts and calls.

Positions in Brunswick, Ipsco, Leap Wireless, and StreetTracks Gold Trust were eliminated. New positions in DR Horton and Microsoft were initiated. Significant reductions in weightings were made in American Home Mortgage and MDC Holdings. The position in Freescale continues to dominate the portfolio, but very large positions in Ameriprise, and MDC were maintained.

It is interesting to me to note the rather heavy position in Microsoft and the continued orientation to homebuilders and real estate with DR Horton, MDC, and MI Developments.

Disclaimer:I, my family, and some clients have a current position in Microsoft and Live Nation.


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