Apple Inc. (AAPL) stock has a huge fan in hedge fund titan David Einhorn. That’s no secret. But Einhorn’s fandom went to a new level last quarter, as he increased his position in the Cupertino-based tech giant by a whopping 52%.
Unlike some big fund managers — George Soros and his portfolio of 222 stocks comes to mind — Einhorn likes to have a smaller number of more densely concentrated positions.
That was evident in his most recent 13F filing, a quarterly report that money managers with over $100 million in assets must file with the Securities and Exchange Commission.
Einhorn, who emerged as a Wall Street legend in part by correctly predicting the demise of Lehman Brothers, reported just 42 stocks in his $6.03 billion portfolio.
His largest stake by far was in AAPL stock, which accounted for just over 20% of his portfolio. After upping the stakes by more than 50%, his fund, Greenlight Capital, now owns more than 11.2 million shares in the iPhone-maker.
At Monday’s closing price of $114.18, Einhorn’s position in Apple stock is worth more than $1.28 billion.
Apple Stock Has Attractive Fundamentals
Einhorn isn’t the only famous hedge-funder betting big on AAPL. Carl Icahn said earlier this year that he felt AAPL stock represented the sort of rare opportunity Netflix (NFLX) stock did when he first purchased that several years ago. Considering Icahn walked away with trough-to-peak gains of 1,000% and upwards of $2 billion on that trade, that would be quite the endorsement if true.
Sometimes Einhorn and his firm Greenlight Capital like to agitate for change at a company they take a holding in, but that seems unlikely in the case of AAPL. Einhorn seems to believe in the company and its current management, and has been enthusiastically bullish on the company since way back in 2012.
A Business Insider story from that year captures his bullishness:
“Some worry if Apple share price doubles, it will become a $1 trillion company. Einhorn said he consulted regulation, and there’s no limit on $1 trillion market cap.”
At a current market cap of $640 billion, what could get AAPL to that $1 trillion level? Well, the fact that it currently trades at just 12 times earnings means that shares may already be undervalued, especially considering the wider market commands a P/E of 22.7.
If AAPL traded for the same multiple as the broader market, that alone would bring it to a market value north of $1.1 trillion.
Of course, Einhorn can also lean on agitators like Icahn to do the dirty work for him. Icahn is pushing for revised tax repatriation laws that would dramatically reduce that taxes corporations pay for bringing foreign profits back to the U.S.
Apple currently has more than $180 billion in cash overseas, or in other words, upwards of $180 billion the company can’t use for things like share buybacks, dividends or other investments in the U.S. market.
If Icahn can successfully change that law — and I wouldn’t put it past him — the Apple stock price would surely skyrocket.
Until then, AAPL shareholders will have to rely on further iterations of the iPhone and iPad, as well as Apple TV, and perhaps one day, an Apple Car, to drive profits and further gains.
That alone is a good enough bullish thesis for Einhorn, Icahn and millions of other investors, myself included.
As of this writing, John Divine was long AAPL stock. You can follow him on Twitter at @divinebizkid or email him at firstname.lastname@example.org.
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