Saturday, March 23, 2013

Why Can’t David Einhorn Get Apple to Budge on its Cash Award?

It was shaping up as an especially good episode of The David Einhorn Show. The founder of the $8.8 billion hedge fund Greenlight Capital was speaking in May 2012 at his favorite venue, the Ira W. Sohn Investment Research Conference, held that year at New York’s Lincoln Center, to a packed audience of money managers eager to hear which stocks were in his cross hairs.

....Then he began to speak about Apple (AAPL). The day before, Greenlight had disclosed in a regulatory filing that its stake in Apple was valued at $877 million, almost 10 percent of the fund’s assets. Einhorn had been buying shares in the company since 2010, initially paying an average of $248. Now they cost $553, a 123 percent gain, and Einhorn told his audience that Apple still had plenty of room to grow, with a price-earnings multiple that was below average. “I have a hard time seeing how anyone ranks Apple as below average,” Einhorn said, arguing that the company could hit a market capitalization of $1 trillion.

Unlike the other stocks he had mentioned, shares of Apple barely budged—King Midas had touched a table, and it stubbornly remained wood. Partly this was a function of Apple ….

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