David Einhorn Buys Time Warner, Life Time Fitness in Q4

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Feb 16, 2015
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David Einhorn (Trades, Portfolio) founded Greenlight Capital in 1996 with $900,000, more than half of which came from his parents, according to Einhorn’s Forbes profile. Today, the firm has about $10 billion in assets under management.

Greenlight Capital is a value-oriented, research-driven firm. Einhorn is a noted activist investor with a strong short-selling record, particularly when he shorted Lehman Brothers into bankruptcy in 2008.

In the fourth quarter, Greenlight purchased 12 new holdings, while the portfolio had a quarter-over-quarter turnover of 28%. The following are the five largest new buys in terms of portfolio impact.

Time Warner Inc (TWX, Financial)

Einhorn’s largest purchase during the quarter was 3,795,700 shares of Time Warner at an average price of $79.87 per share. The purchase accounts for 4.3% of the portfolio.

The media and entertainment company has four segments: Turner, HBO, Warner Bros., and Time Inc. Turner.

The stock has been up 34% over the past year and is slightly overvalued according to the Peter Lynch chart.

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Diluted EPS has grown consistently since FY 2009 and is estimated to be $4.34 for FY 2014 based on preliminary data.

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The stock currently trades at $83.87 with a P/E ratio of 18.5 and P/S ratio of 2.4.

Keysight Technologies (KEYS, Financial)

Einhorn purchased 4,464,846 shares of Keysight Technologies, which traded for an average of $32.15 during the quarter. The company now accounts for 2% of the portfolio.

Keysight is an electronic measurement company that delivers solutions in wireless communications, aerospace and defense and semiconductor markets. The company spun off from Agilent Technologies and began trading under the symbol KEYS in November.

The operating margin for FY 2014 was 16%.

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The stock has been up 29% over the past year and currently trades at $36.49. The current P/E ratio is 60.6, while the P/S ratio is 2.1.

Chicago Bridge & Iron (CBI, Financial)

Einhorn also purchased 2,940,000 shares of Chicago Bridge & Iron for an average price of $49.25 per share. The company accounts for 1.6% of the portfolio.

CBI is an energy infrastructure company whose services include design, engineering, construction, maintenance and environmental services.

The stock has declined 51% over the past year and currently trades at $38.69. When comparing the price to the Peter Lynch earnings line, the company may be undervalued.

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Diluted EPS has grown consistently, increasing by almost 24% over the past five years. EPS for the trailing 12 months was $5.41.

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The current P/E ratio is 7.1 and the P/S ratio is 0.34.

Halyard Health (HYH, Financial)

Einhorn bought 2,353,181 shares of Halyard Health, which traded for an average of $39.27 during the quarter. Halyard now accounts for 1.4% of the portfolio.

Halyard is a medical technology company with products and solutions in infection prevention, surgical solutions, respiratory health, pain management and IV therapy.

The company spun off from Kimberly-Clark in November and operates 12 global manufacturing facilities with 16,500 employees worldwide.

The company has yet to make a profit since becoming an independent company.

Life Time Fitness (LTM, Financial)

Einhorn’s fifth-largest purchase was 1,835,685 shares of Life Time Fitness at an average price of $53.59 per share.

Life Time Fitness operates large multi-use sports, fitness, and recreation and spa centers in residential centers of metropolitan areas. It operates 108 centers, with 24 locations in Minnesota and 18 in Texas.

The stock has been up 27% over the past year and currently trades at $56.10. GuruFocus rates the business predictability as 3.5 out of 5 stars. The DCF model estimates a fair value of $55.80, indicating the company is very close to fair valuation.

The current P/E ratio is 18.7 and the P/S ratio is 1.8.

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