David Einhorn’s Comments at Recent GLRE Conference Call
As the markets continued its relentless climb, we became more conversely positioned and we ended the quarter 35% net long, down from 42% at the end of the second quarter. Our long portfolio more than doubled the S&P 500 written especially every long position was profitable in the quarter. Apple was our biggest winner as its earnings guidance stabilized and the new iPhones released and had initial record sales.
We believe that Apple’s brand product line, customer ecosystem, balance sheet strength and capital allocation strategy warrant a higher multiple than the current single-digit multiple net of the substantial cash on its balance sheet.
During the quarter Verizon agreed to acquire Vodafone’s 45% stake in Verizon Wireless for $130 billion, a price that is a premium to the value we expected from a possible sale. We continued to have exposure to Vodafone’s core business which currently trades below its less exciting peers and it’s also an attractive acquisition target on its own.
We also had contributions from two new positions we accumulated during the quarter, one is the U.S. based technology company and the other is Osram Light, a lighting solutions company based in Germany that spun-off from Siemens during the quarter.
Our short portfolio detracted from performance in the third quarter, the losses in the short portfolio were broad based and we continued to be short most of the companies that contributed the loss. These include a variety of companies which tend to have conventional valuations rather than speculative story talks that have caused excessive pain for other short sellers.
We continued to be short Green Mountain which trades at a premium to the market multiple on next year’s earnings estimates that we believe the company will not achieve. The company faces significant competitive challenges that we believe will impact its margins over the next 12 months.
Our macro positions were slightly negative in the third quarter and then became less volatile which caused losses on our puts. The weakened yen remains one of our most profitable positions so far this year. We continued to have substantial exposure to further weakening, our macro positions are slightly positive for this year so far.