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Which Company Will David Einhorn Badmouth Next?

Ian Wyatt

The Wall Street Journal wrote an interesting profile on renowned hedge funder David Einhorn yesterday. Einhorn is the 43-year-old manager of Greenlight Capital, and he wields a tremendous amount of power on Wall Street these days.

Any time Einhorn badmouths or even questions a company he feels has a murky future, the stock immediately gets hammered. Just ask Green Mountain Coffee Roasters (NASDAQ: GMCR).

So that got me thinking: With the Value Investing Congress coming up in two weeks, which stock will be getting the Einhorn treatment next?

Einhorn is a member of the Investing Congress’ so-called “faculty”, which means he presents investment ideas at the organization’s annual get-together in New York. This year’s event will be held October 1-2.

Our own Ian Wyatt attended last year’s Investing Congress and was sitting in the audience when Einhorn essentially gave Vermont’s own Green Mountain Coffee Roasters the death sentence.

Einhorn gave a 45-minute, 100-slide PowerPoint presentation outlining his concerns about the future of Green Mountain’s business. Those included an ongoing SEC inquiry into the company’s accounting practices, the expiring patents on its market-dominating K-Cups, its negative cash flow, and its unsustainable capital spending.

Within hours of Einhorn’s presentation, GMCR shares had fallen 10%. Before Einhorn’s presentation, GMCR shares were trading around $92. Today, 11 months later, they’re trading for just over $30. Almost all of Einhorn’s concerns about the company have come to fruition.

As The Journal noted, Green Mountain is far from Einhorn’s only victim of late. He recently called into question the sales practices at nutritional-supplement company Herbalife (NYSE: HLF). Within a day, the stock had fallen 20%.

That’s nothing new. According to The Journal, nine companies saw their stocks plummet after Einhorn made negative comments about them. Their median declines were 4.9% within one day and 13% within a month.

Einhorn’s praise has had the reverse effect on certain stocks. Even mighty Apple (NASDAQ: AAPL) got a 1% bump after Einhorn predicted the company might be headed for a $1 trillion valuation.

But the move is more pronounced when Einhorn’s comments are negative than when he’s positive.

Last year Green Mountain Coffee Roasters felt Einhorn’s wrath. With the Value Investing Congress right around the corner, chances are he’ll have concerns about another seemingly thriving company come early October.

Be prepared for when he does. His next “victim” could be a stock you own.