David Einhorn is the hot-shot hedge fund manager of Greenlight Capital. But he doesn’t just “walk the walk,” he “talks the talk,” too.
In 2013, his hedge fund delivered a net return of nearly 20%. And lately, Einhorn has been making headlines again after buying stakes in several companies. One of those names was EMC (EMC), a solid stock that I also like.
You’re probably familiar with EMC. It is the world’s largest data storage provider with about a 20% share of the huge market, and it is focused on two major opportunities in the IT industry.
The first is the explosion in information growth that is far outpacing most IT departments’ ability to handle it. The second is cloud computing. This technology lets you store your data from your own computer, office or data center with third parties via the Internet. These third parties allow you to access and manage your data anywhere you have an Internet connection. Cloud computing is a growing trend that should reignite EMC’s growth prospects, and the company is extraordinarily well-positioned.
So what does Einhorn’s move mean for EMC stock?
For me, not much. While it’s hardly a bad thing for a stock to get some positive buzz, especially when a big investor buys in, I don’t think his investment moves the needle that much or signals activist intent.
For one, his stake is 2.9 million shares out of 2 billion outstanding, so this is less than 1% of the float. This is also a small weighting of Einhorn’s Greenlight Capital, at roughly 1% of the fund. So clearly, if he’s going to scale into a weightier position, this is only a toe in the water.
By my own experience, activist investors rarely start making much noise until they cross the 5% threshold. I would say the move is a quiet one, and one that bears watching, but bulls on the name can take comfort in the fact that a famed hedge fund titan is also positive on the company.
Regardless, EMC is a strong company with a bright future ahead of it, and I see EMC stock moving higher as it benefits from growth in enterprise spending through the next year and beyond.