Bloomberg News

Berkshire Trims GM Stake While Einhorn Exits Amid Recalls

May 16, 2014

Berkshire Hathaway chairman Warren Buffett

Warren Buffett, chairman of Berkshire Hathaway Inc. Photographer: Daniel Acker/Bloomberg

Warren Buffett’s Berkshire Hathaway Inc. cut its stake in General Motors Co. (GM:US) in the first quarter and some hedge funds including Greenlight Capital Inc. exited completely as the carmaker recalled a record number of vehicles.

Berkshire reduced its GM holdings by 25 percent during the three-month period to 30 million shares, the Omaha, Nebraska-based company said in a regulatory filing. Greenlight, run by David Einhorn, liquidated about 17 million shares worth about $697 million as of March 31, according to a filing.

GM recalled 2.7 million cars yesterday for issues including potentially faulty brake lights, lifting its total for vehicles called back in the U.S. this year to 11.2 million. Chief Executive Officer Mary Barra has reorganized GM’s engineering department and introduced a program to spur employees to flag safety concerns amid investigations of the company’s handling of a defective ignition switch linked to 13 deaths.

Related: Buffett’s Berkshire Discloses $528.7 Million Verizon Bet

“While a number of factors have pushed GM stock downward recently, the controversy around the ignition switch recall appears to have had a chilling effect, and has underscored the idea that despite attractive valuation, GM might perpetually be a value trap,” Brian Johnson, a Chicago-based analyst at Barclays Plc who rates GM the equivalent of a buy, wrote in a May 14 report.

Berkshire first bought a stake in GM, the largest U.S. automaker, in the first quarter of 2012. The purchase led Adam Jonas, an auto analyst at Morgan Stanley, to publish a report titled “Buffett Motors.”

Praising Barra

Buffett, 83, said this month at Berkshire’s annual meeting that he had lunch with Barra about a week earlier and called her “terrific” in an interview with CNBC. He said he didn’t hold GM shares personally and that Berkshire’s decisions related to its stake in the carmaker would be made by deputy investment manager Ted Weschler.

Einhorn’s Greenlight is best known for wagering on a decline in Lehman Brothers Holdings Inc. before the bank collapsed in 2008. GM was Greenlight’s third-biggest position by market value as of the end of last year.

Eton Park Capital Management LP, run by former Goldman Sachs Group Inc. partner Eric Mindich, sold out of 2.74 million GM shares worth about $112 million as of March 31, according to a filing. Omega Advisors Inc., the hedge fund run by former Goldman Sachs Group Inc. analyst Leon Cooperman, also liquidated about 1.05 million GM shares worth about $43 million.

Stake Increases

Other hedge funds boosted their stakes in GM during the first three months of the year, including David Tepper’s Appaloosa Management LP, which raised its holdings to about 7.9 million shares worth $271.4 million.

Kyle Bass’s Hayman Capital Management LP increased its position in GM by 54 percent to about 7.1 million shares worth $243.9 million, according to a filing. Bass, known for his bet against subprime home mortgages before the financial crisis, disclosed that it took a stake in GM late last year.

In total, institutional investors increased their stakes in GM by about 17 million shares during the quarter, while the market value of their holdings fell about $3.3 billion, according to data compiled by Bloomberg from 13F filings.

GM shares dropped 1.7 percent to $34.36 yesterday. The stock declined 16 percent in the first quarter, compared with a 1.3 percent gain for the S&P 500 Index.

To contact the reporter on this story: Craig Trudell in Tokyo at ctrudell1@bloomberg.net

To contact the editors responsible for this story: Chua Kong Ho at kchua6@bloomberg.net Lena Lee, Jamie Butters


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