Einhorn Q4 letter

[Brendan Mathews]

https://www.scribd.com/document/336810961/Greenlight-Letter-Q4-2016

[Richard M]

He proposes something I've been canoodling a long while:

If we discount foreign tax to encourage repatriation...ostensibly all the big tech companies benefit.  But at the same time - their gaap numbers have rarely, if ever, reflected the higher rate in the first place. 

So, will it just be a perception pop?  It can't really be a financial statement pop, right?  And it's not as if any of them have been prevented from doing things due to a lack of cash (they've repurchased shares, apple raised debt at near nil rates to fund repurchases, etc).  So there's no opportunity cost being relieved, either.

Generally speaking on Einhorn...is he good anymore?  I know he was good, but he hasn't outperformed recently at all.  I remember at some point last year he loaded up on Macy's (bought in at 45 and sold it all at 32 six months later), which seemed like a disaster and was.  And he's short Amazon, which makes all the sense in the world except that there's no catalyst and it's always been wrong and money-losing.

The jokes are the hokiest jokes of all letters.

I also learned about AerCap from his letters, but damn that company seems to only move down with the market and never up with it.  Has had a ridiculously hard ceiling in the mid 40s.  Quick googling seems like Einhorn really pushed it mid 2015, and it's done nothing except spike down and recover.  Pays zero dividend, so patience hasn't paid: you can get in today at about the same price as then.

My fear with this one is again any pullback or worry about a global slowdown just crushes the stock.

Thanks Brendan - I owe Einhorn for CNXC, and I like his GM pick due to the big dividend (4.4%) while only paying out a quarter of profits. 

On Wed, Jan 18, 2017 at 10:31 AM, Brendan Mathews <bmath...@gmail.com> wrote:

https://www.scribd.com/document/336810961/Greenlight-Letter-Q4-2016

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Richard Mordini

[Andrew Stepner]

I agree with you on Amazon Richard and with all due respect I'd go further and say that shorting Amazon does NOT make all the sense in the world. It makes NO sense. I am long AMZN, it is one of my very biggest holdings, and I don't know if I could sleep at night if I was short Jeff Bezos. I'm not sure how someone can have the confidence to bet against them. To me it is quintessential misplaced confidence.

I also question Einhorn's goodness. He stills has very interesting takes and I find he has value for me, but only after doing a lot of "filtering" on what he says.

I was also wondering about the cash repatriation angle (see my 11/10/16 email). I'm not going to be playing the tax policy trade yet.

#Stepner

[Brendan Mathews]

Generally speaking on Einhorn...is he good anymore?

Depends. He isn't bad... he seems to have raised money independently with a good record of performance for a hedge, and he's become a bit of a celeb. He publishes thorough analysis occasionally...  of course, he think's he's the smartest guy in the world (like Ackman)... and I wouldn't invest in his fund. 

But I think he's independent minded and worth a read... don't buy GM or short AMZN/NFLX.. 

[Richard M]

Some of his stuff makes sense and he's totally worth a read. But other stuff like buying Macy's and assuring Amazon seem nonsensical at the outset so when he loses money on them you definitely think "what was he thinking?". I love on the Macy's buy...."management revised their forecasts down which destroyed our thesis of easy comparables.". Makes it seem like management did something to cause the loss and could have been avoided. Rather than "the business is in disarray and on the wing side of major trends".

GM trades REALLY cheap. I entered some small option trades around the dividend dates.

Fwiw his take that self driving cars would spur industry sales for awhile as new models with improved features cause upgrades is dead wrong. Once the car can self drive the only upgrades you care about are software ones. The industry turns into fitness clubs where machines are upgraded seldomly.

sent on the go

[Richard M]

probably should warrant its own thread, but it's applicable here:

I like GM now.  Yes there are storm clouds on the horizon, but "what is dumb at one price is smart at another."

Company had a great quarter, and it just trades so cheap.  They did $1.70ish of EPS and guided to $6-6.50 for the year.  Stock is at $34.50.  That's a PE of 5.5x.  Dividend yield of 4.4%. 

They will buyback $5B of shares this year vs a 52.B market cap.

It's hard to imagine a world that never ends up thinking differently about the company.

So combine buying GM with a covered call strategy and I don't see how you get hosed here:

Ex date is 6/7/17.

Buy GM for $34.50 today.

Sell June 9th $35 strike covered call for 70 cents.

If stock moves above $35 and your shares get called away, you make $35/(34.50-.7) = 3.6% in 1.5 months.

If stock stays below $35 you get 38 cents in dividends, meaning you've received $1.08 total which is 3.1% downside protection.  You'll end up receiving another 2 dividends this year which is another 72 cents, and should be able to scare up another $1-2 in covered calls, meaning $1.72-2.72 per share, 5-7.9% additional.

So I see 8-11% downside protection, which is about high $30s.  Stock traded as low as $28 in the last year.

But what I like most of all in this scenario is that everyone is hammering management about a car downturn and how it will screw over the company.  So management is actively aware and planning around this.

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Richard Mordini

[Andrew Stepner]

Do you guys like either BHF Brighthouse Financial or GRBK Green Brick Partners? Both sited as heavy longs in the latest Greenlight letter, and the theses both seem fairly compelling:

https://www.scribd.com/document/443770600/Greenlight-Q4-2019#download&from_embed  

Stepner

https://www.scribd.com/document/336810961/Greenlight-Letter-Q4-2016

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Richard Mordini

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Richard Mordini

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[Andrew Stepner]

FYI I am back long on both $GRBK and $BHF

[Andrew Stepner]

I am surprised $GRBK has not kept pace with the market recently. I am probably going to add more of it today before they report earnings tonight.

I don't necessarily love that Einhorn has reduced the greenlight stake. But Green Brick just seems so cheap.

Stepner