There is “further embedded value in some of the longs that have underperformed in the quarter, including General Motors and Marvell Technology,” Einhorn said today in a conference call discussing investments at Greenlight Capital Re Ltd. (GLRE), the Cayman Islands-based reinsurer where he is chairman. Both companies trade at low valuations relative to earnings and have “strong cash positions,” he said.
Einhorn uses the reinsurer to generate funds for bets on gains and declines in securities. Greenlight Re had so-called long investments, or bullish wagers, of $1.23 billion as of June 30, compared with $1.05 billion on Dec. 31, the firm said in a filing yesterday.
“Although our net exposure has increased a bit as we’ve found compelling bottom-up, long investment opportunities, we remain cautious about the macro headwinds,” he said. “The European crisis appears to have no simple solution, while most large economies including China and the U.S. appear to be slowing down.”
GM, the world’s largest automaker, climbed 1.1 percent to $19.57 at 10:49 a.m. in New York trading. The company slumped 23 percent in the second quarter. Marvell added 0.6 percent to $11.40. The Bermuda-based developer of circuits for communications markets dropped 28 percent in the three months ended June 30.
The automaker’s share price is 5.4 times earnings over the past year, compared with a ratio of 14 for firms in the Standard & Poor’s 500 Index during the same period, according to data compiled by Bloomberg. The Detroit-based company had more than $30 billion in cash and marketable securities as of March 31. Marvell’s price-to-earnings ratio is 12.
Greenlight Re’s net loss widened in the second quarter to $36.1 million from $16 million a year earlier as investment results worsened amid a decline in equity markets. Bets on falling stocks, including a wager against Green Mountain Coffee Roasters Inc. (GMCR), aided investment results.
“While our shorts went down more than the market, our longs also went down more than the market and gave back some of the first-quarter gains,” Einhorn said.
The reinsurer fell 4 cents to $23.46 and has slipped less than 1 percent this year. Einhorn and his hedge fund Greenlight Capital Inc. are known for shorting Lehman Brothers Holdings Inc. before it collapsed in September 2008.
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