Greenlight Returns 6.8% In 1Q, Einhorn Says Apple Remains Cheap
05/30/2012| 03:26pm US/Eastern
By Liz Moyer and Amy Or
David Einhorn's Greenlight Capital posted a 6.8% return in the first quarter buoyed in part by Apple Inc. (>> Apple Inc.)--a stock the hedge fund manager described as "one of the most misunderstood" in the market.
Greenlight's gains were higher than the industry average of 4.94%, but less than the S&P 500 index's 12.58% rise for the quarter, including dividends.
In a letter to investors dated May 29, Greenlight said Apple's revenue grew by 66% and earnings per share by 78% last year, but its share price only rose 25%.
"Yet not everyone agrees that AAPL's stock price is merely playing catch-up to its fundamentals," the letter said.
"Not only do we think the skeptics are misguided, we believe the shares remain cheap," it added.
Apple shares jumped almost 50% to $600 a share from $405 in the first quarter, according to the Greenlight letter. They were nearly 1% higher at $577.64 in early afternoon trading Wednesday.
The comments followed Einhorn's remarks at the Ira Sohn Conference earlier this month that investors "assume that Apple is a hardware company" and its fate hinges on the success of a particular product. But he said Apple is a software company that can get customers hooked once it gets them to use its products.
Greenlight said Seagate Technology Inc. (STX) was another major winner for the firm during the first quarter. Seagate was 1.9% lower at $24.55 in recent trading.
"Though the shares advanced from $16.40 to $26.96 during the quarter, the share price remains at a very low multiple of both near-term and longer term earnings," the letter said, adding that the firm expects the stock's earnings to reach $10 to $15 a share this calendar year, before settling at an average of about $5 a share in future years when industry shortages caused by last year's floods in Thailand subside.
- Amy Or, Dow Jones Newswires, +1 212 416 3142, firstname.lastname@example.org