BOSTON (Reuters) - David Einhorn's hedge fund Greenlight Capital, which gained 8.4 percent in 2016, said on Tuesday it raised its stake in General Motors (NYSE:GM), already the firm's biggest position, and still likes Apple Inc (NASDAQ:AAPL) but is betting that companies like Caterpillar Inc (NYSE:CAT). and other industrial cyclicals will fall.
In a letter to Greenlight clients dated Monday and seen by Reuters, the firm said it feels it is well positioned for 2017. "The post-Great Recession easy money policies have been good for Wall Street but bad for Main Street," the letter said. "It's possible that the TP (Trump Presidency) reverses these policies, which would be good for Main Street but rough on Wall Street."
Einhorn argued that Trump seems to be most focused on employment, proposing tax cuts, infrastructure investments plus anti-immigration policies and trade protectionism. More jobs and higher income for savers, the letter said could push up the consumer durables and "there is no better consumer durable than an automobile."
Automaker General Motors is already the hedge fund's biggest name in the portfolio with 17 million shares owned at the end of September. Greenlight did not say by how much it raised its stake but will disclose that next month when it releases its holdings for the end of December.
The fund also likes Apple, a company it has long owned, as well as what it called tax-paying U.S. value stocks like Dillard's and DSW.
On the other hand, Trump's promises to build roads and bridges, which had sent many infrastructure-related companies surging after the election, signal a sign to sell because they moved much higher. Greenlight said it is betting against Caterpillar and other industrial cyclicals, which it did not name. "Even in a U.S. infrastructure boom, CAT is overpriced," the letter said.
Similarly, Einhorn is still short oil frackers.
But he is sticking by his bet on gold, arguing that Trump could create many economic and geopolitical uncertainties where gold could be a helpful hedge. The letter also joked that gold might see its value rise in light of what might be required to "redecorate the White House to Mr. Trump's tastes."
Greenlight said it made a mid-sized investment in a European financial company that he declined to name and unveiled the name of an earlier investment in a European life sciences firm: Bayer (DE:BAYGN).