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catoismymotor (45.92)

Yesterday I fired David Einhorn.

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May 09, 2013 – Comments (13) | RELATED TICKERS: GLRE , AAPL

Good morning, my Foolish compadres. I know it has been a while since I last chimed in. Today I come out of my hole to share something I think is important: Yesterday I fired David Einhorn by selling all my shares of GLRE. You may care to know why, or you may not give a rodent's butt. However I am going to tell you exactly why I was compelled to act.

As many of you are aware David Einhorn is regarded as a boy genius in the world of money. He has enjoyed success since early on and has created quite a reputation for himself. It was this reputation in part that drew me to his GLRE. But something happened that I found to be distasteful: He got into a big public row with AAPL's Tim Cook about how AAPL should be using its cash. Lawyers at one point even entered the frey. The last thing I want is the head of a company picking fights in public. In my opinion it was unprofessional. And I suspect since Mr. Cook announced some changes to how AAPL will handle its cash that are along the lines of what Mr. Einhorn wanted that Mr. Einhorn will become emboldened to act in a similar manner in the future eventually leading to destructive hubris that will put his investors at excess risk.

I understand that Mr. Einhorn has purchased bagillions of dollars worth of AAPL stock for his company and that he felt he was acting on behalf of the best interest of his clients. However, I believe, if you are not happy with the way a company you purchased is being run by the management you need to sell and find somewhere else for the money to be used, as I just have. 

Goodbye, Mr. Einhorn. I wish you all the best in your future endavours. This one investor tribe has spoken, you're fired!

- Cato

 

13 Comments – Post Your Own

#1) On May 09, 2013 at 9:45 AM, awallejr (83.78) wrote:

Well activist shareholders can be good for the little investor.  Icahn certainly has opened value in many stocks as an example.  I remember posting about someone who had a big position in a small cap company and he was able to fire the CEO and a bunch of the board of directors when they gave themselves a ridiculous raise from a good chunk of the company's profits.

I am holding on to my 13 shares.

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#2) On May 09, 2013 at 10:32 AM, NewAlchemist (37.26) wrote:

I am going to have to respectfully disagree with the logic here.

You seem to have a feeling that he wants to act in the best interest of his clients - I agree - I like that, but you don't like the activist aspects of his disagreement with management.

A few years ago Warren Buffett disagreed with Kraft CEO Irene Rosenfeld buying Cadbury with Kraft shares.  He said that she was over paying and buying the company with a very expensive currency.  Was Bufett out of line for publicly complaining about management?  This is a trick question because Bufett is somewhat of a deity at MF.

Awallajr also brings up Icahn.  He's been serving his clients pretty well.  Instead of just selling shares or just complaining about inefficient management he does something about it.  This is actually a good thing.  People like Ichan keep crappy management in check.

Einhorn is a smart cookie.  He's sharp, I like him.  He does his homework and he predicted the whole Lehman house of cards would come crashing down, and it did.  He opens his mouth and Green Mountain Coffee Roasters and Chipotle get hammered.  A lot of people don't do due diligence but he does and his work is good.

He's not just any old guy, he owns a big chunk of Apple and he wants a say in how it is run.  He's trying to increase value for you the shareholder.

 

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#3) On May 09, 2013 at 2:47 PM, catoismymotor (45.92) wrote:

New,

I don't like his style so I fired him. I decided to put my money somewhere else where the top dog is not a blossoming attention hussy. It was not something I relished doing. I don't think any less of you or awallejr for liking the guy and being invested with him. I thought it was best for me to cash in my chips and move on.

I like Buffet, in general. I can't remember if he hired a brass band to back him up or just let it slip when when word got out about him not being happy about the Kraft deal.  I'm not a fan of Icahn. He's a corporate raider and will say and do most anything to line his pockets. 

I hope the weather where you are is as lovely as it is here. 

- Cato

 

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#4) On May 09, 2013 at 3:06 PM, thecherryz (91.24) wrote:

How do you think Buffet took over Berkshire Hathaway?  Many of the best fund managers are activists.  Trying to increase the value of your holding through capital allocation strategies isn't a bad idea. 

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#5) On May 09, 2013 at 3:14 PM, L0RDZ (84.96) wrote:

Wow  so  like  Apple's  stock  was  tanking   and  its  widely  held  that  the  financing  of  bonds  to  enable  stock  buy backs  and  cash  dividends  was  the  put  that  reversed  the  horrible  downward  trend  in  apple.

There was  no  huge  fight ?  Cook  couldn't  take  candy  away  from  a  defenseless  baby  let  alone  justify  the  stagnation  of  supposed  cash  that  will never  be   returned  to  the states  so as  to perpetually  avoid  any  tax  implications   under  current  US  tax laws.

I  agree  that  this  financing  of  bonds  may be the  known  by  historians  as  the  beginning  of  the  end,  but  what  alternative  did  apple  provide  so  as  to  unlock  shareholder  value ?

Einhorn  is  indeed  smart,  maybe  too smart for his own  good  and  man its  nice to see  shareholders  being  able  to  have  their  desires  met,  after  all  if  you  own  part of  the company, shouldn't  you  get  paid  or  at  least  eventually  get  returned  or  receive some benefit in  owning shares of  a  company ?

Too often  we  have  operators  who run  companies  without  any  thought  as  to  the  fact  that they have  to  answer  to  the  real owners.

If  Tim Cook  really  believed  in  something  like  Apple  needs  all  that  cash,  he  could  have  stood his  ground,  but   he  didn't  he  was  quick  to  give  in   almost  like  a  prom  dress coming  off  on a  drunk  and  drugged out  streaker.

Kudos  for  Einhorn,  getting  what  he  wanted,  hopefully  apple's  books  aren't  cooked.

 

 

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#6) On May 09, 2013 at 3:17 PM, NewAlchemist (37.26) wrote:

Cato

I am not invested with Einhorn but I've admired his skill as an investor and as a poker player. 

I'd disagree that he is an attention hussy.  He presents a 100 slide power point presentation at the value investor conferences and people listen.  He makes his case and a stock like Green Mountain Coffee Roasters goes from 120 or so to 20 or so.  He did his homework even besides the usual fundamental analysis.  He had people on the ground sniffing out potential fraud in inventory practices.

So is Warren Buffett an attention hussy?  Capitalistic Wood stock in a basketball stadium?  2 hour CNBC appearances where they ask him everything including his political views?  Opinion Pieces in the newspapers.  He goes on CNBC and tells Becky Quick that he had an ephiphany when he was taking a bath to buy Bank of America stock.

The weather is good, I hope the sale works out for you.

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#7) On May 09, 2013 at 3:25 PM, catoismymotor (45.92) wrote:

So is Warren Buffett an attention hussy?

Yes.

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#8) On May 09, 2013 at 8:21 PM, HarryCarysGhost (99.69) wrote:

Hey Cato,

Good to hear from you.

I have no opinion on the hussiness of Mr. Einhorn or Mr. Buffett and nor should I (what they do behind closed doors, or in this case in front of millions of people is really none of my business.)

What I do have an opinion about is the stock has been stuck @ $25 range since Jan of 2010. With no dividend what's the point of holding it?

70's late afternoon sprinkle, very pleasant.

Cheers.

 

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#9) On May 09, 2013 at 9:16 PM, Mega (99.95) wrote:

Smack me in the face and call me Sally, I agree with LordZ.

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#10) On May 10, 2013 at 12:21 AM, ikkyu2 (99.32) wrote:

One of the main problems with index funds is that they divorce the ownership of a company from the management.  Anyone who has ever run a business knows that when the management quits running the business in the interest of the owners, the business does poorly by any objective metrics.  Heck, I've fired managers in my own small business for just this reason.  My interests are always well taken care of.

Index fund owners - say the S+P - own small bits of hundreds of companies and they have no voice.  The index fund managers don't show up at shareholder meetings, anyway.  In many cases they are the silent majority shareholder but they never say anything; they are 'passive' investors and even call themselves that.

I believe that owning a company gives you a right to have a voice in the way the company is governed, and that under our capitalist system, money talks; B.S. is given a golden parachute and asked to exit the aircraft.  

And that's how it should be.  Kudos to the Einhorns, Icahns, and other activist investors who uphold this central tenet of our capitalist tradition. 

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#11) On May 10, 2013 at 12:38 AM, awallejr (83.78) wrote:

Smack me in the face and call me Sally, I agree with LordZ.

hi Sally.

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#12) On May 10, 2013 at 12:51 AM, NOTvuffett (< 20) wrote:

I am dissapointed that many of the smallish investors don't have more say-so in companies like this.

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#13) On May 15, 2013 at 11:01 AM, rfaramir (29.30) wrote:

+1 rec for boldness of move and speaking your mind

But I don't think I understand the move.

You feel that "he was acting on behalf of the best interest of his clients"

You admit that his tactic worked: "along the lines of what Mr. Einhorn wanted"

You admit that "He has enjoyed success" in the past. 

But you fear that "Mr. Einhorn will become emboldened to act in a similar manner in the future eventually leading to destructive hubris that will put his investors at excess risk."

Then there is "distasteful" "big public row" "Lawyers" "head of a company picking fights in public" and "unprofessional". These all I understand and sympathize with. But they don't seem to add up to enough to trigger your reaction. Then again, it wasn't my money on the line.

 

"you may not give a rodent's butt" au contraire, I am a big believer in freedom of trade including choice of medium of exchange, so if that's the currency you desire, and I had one, I'd give it to you to hear more of your thoughts on the matter.

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