David Einhorn, whose iconic hedge fund Greenlight Capital gained Wall Street immortality by shorting Lehman Brothers shares into the financial crisis, is getting more bearish on something else: Apple (AAPL) stock.
It’s the latest bump in the road for AAPL stock, which, less than a month ago, was sitting on gains of 20% in 2015. But a series of unfortunate events conspired to send the stock lower, and now it seems that even David Einhorn is getting the jitters.
What could be the rationale behind the guru’s move? Let’s take a look at a few feasible reasons Wall Street’s golden boy might not be so into AAPL anymore.
First off, we should acknowledge that Einhorn didn’t sell off his entire AAPL position, just a small chunk. He reduced his position from 7.44 million shares to 7.38 million shares in the second quarter, and the Apple position is still the largest in Greenlight’s portfolio, which owns around $8 billion worth of stock.
While that might seem like some minor selling in the grand scheme of things, it’s indicative of Einhorn’s mindset: He thinks he can get better deals elsewhere in the market. Specifically, he ramped up his stake in General Motors (GM) by 54%, from 9.5 million shares to 14.6 million shares.
Taking a look at some of the recent developments with AAPL stock, Einhorn’s decision might end up being a savvy move.
AAPL’s Latest Setback
Apple’s recent fall from grace began after its fiscal third-quarter earnings report last month. Even though AAPL topped expectations on both top- and bottom-lines, iPhone sales were underwhelming by Wall Street standards, and Apple shares took an immediate 7% haircut on the news.
Then, just a few weeks later, an ominous technical indicator reared its ugly head, as AAPL stock dipped below its 200-day moving average for the first time in almost two years. The event wasn’t something everyone cares about, but there are plenty of market technicians out there, so shares still took a gnarly hit.
And, of course, China came out of left field last week to devalue its currency. That’s great for Apple’s Chinese labor costs, but not so great for its Chinese sales. Considering that the China opportunity — a market that still has plenty of room to grow for Apple — is the only intelligible reason AAPL is still considered a mega-cap growth stock, a weaker yuan isn’t exactly making Tim Cook’s day.
Although Apple has been fighting an uphill battle recently, David Einhorn’s pared stake in the company is hardly damning for AAPL stock. The company’s biggest individual shareholder, famed corporate raider Carl Icahn, recently sold Netflix (NFLX) and cited Apple shares as the more attractive opportunity today.
Tune out the noise. Apple isn’t going anywhere. In fact, with shares trading at less than 12 times 2016 earnings, now’s a good time to buy Apple stock on the cheap.
As of this writing, John Divine is long shares of AAPL stock. You can follow him on Twitter at @divinebizkid or email him at email@example.com.
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