Greenlight Capital Inc. closed its short position on retailer J.C. Penney Co. (JCP:US) and sold its long holding in Microsoft Corp. (MSFT:US) in the second quarter, founder David Einhorn said in a letter to investors.
Greenlight, which oversaw $8.8 billion in assets at the start of the year, returned 1.2 percent in the quarter and 7.1 percent in the first half of 2013, the hedge-fund firm said in today’s letter, a copy of which was obtained by Bloomberg News. J.C. Penney was “our most profitable short (JCP:US) of 2012,” and Greenlight covered its position when the board fired Chief Executive Officer Ron Johnson “before he could turn the company into a penney stock.”
J.C. Penney, based in Plano, Texas, is trying to rebound from a 25 percent drop in sales last year under Johnson’s leadership. He was replaced as CEO by Myron Ullman in April. Ullman, who ran the chain from 2004 to 2011, borrowed $850 million from the company’s credit line and secured a loan of $2.25 billion from Goldman Sachs Group Inc.
“In 2006 we compared Microsoft to A-Rod, which was a compliment at the time,” the firm said, likening the Redmond, Washington-based software maker to New York Yankees baseball player Alex Rodriguez. “In 2013, the comparison is still apt, but it is no longer a compliment.” Windows 8 “appears to be a flop, and a decade of mismanagement has put Microsoft at risk of becoming a shrinking company,” the firm told clients.
Greenlight also closed long positions in CBS Corp. (CBS:US), Seagate Technology Plc (STX:US), Sprint Corp. (S:US) and Republic Airways Holdings Inc. (RJET:US); and shorts in Aruba Networks Inc. (ARUN:US), Boston Properties Inc. (BXP:US) and Essex Property Trust Inc. (ESS:US), Dick’s Sporting Goods Inc. (DKS:US) and Greenhill & Co.
The fund added long holdings in ING US Inc. (VOYA:US) and Greek banks Alpha Bank AE (ALPHA) and Piraeus Bank SA (TPEIR), according to the letter.
In a short sale, an investor borrows a stock and then sells it in anticipation that the price will fall and it can be repurchased at a lower price later.
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