With New Calls, Einhorn Shows Characteristic Cynicism, Wit

Hedge-fund manager David Einhorn was in top form at the Value Investing Congress conference in midtown Manhattan Tuesday morning, poking fun at a range of targets from Bill and Hillary Clinton’s marriage to Green Mountain Coffee Roasters management — and perhaps most of all at investors who send stocks spiraling downward at his mere utterance of their company names.

David Einhorn, president of Greenlight Capital Inc., speaks at the Value Investing Congress in New York.
Peter Foley/Bloomberg via Getty Images
David Einhorn, president of Greenlight Capital Inc., speaks at the Value Investing Congress in New York.

Joking about a recent Wall Street Journal story suggesting that stocks affected by his comments have been “Einhorned,” the hedge-fund manager said dryly that “apparently now I’m a word.”

Nonetheless, the comments that followed sent one automaker, General Motors , surging nearly 5 percent and one new short target, Chipotle Mexican Grill , down more than 3 percent, indicating that the market has plenty of faith in Einhorn’s ability to move stocks. (To be sure, however, the 6 percent rally of longstanding target Green Mountain left some investors scratching their heads.) (Read More: Einhorn Bashes and Boosts at Value Investor Conference.)

Einhorn also shed light on how he’s navigating some of the most troublesome current tail risks, including the European debt crisis and political uncertainty in the U.S., by picking stocks that will be affected for good or ill by those arenas and investing accordingly.

For instance, the health-insurer Cigna, a surprise bull thesis Einhorn revealed, has been dogged by concerns about the impact of the Patient Protection and Affordable Care Act and whether it would curb the profitability of health maintenance organizations, or HMOs, he explained.

Investors are generally wary of HMOs, Einhorn said, because their performances can be hard to predict from quarter to quarter, and given that “some years there’s a bad flu season, or even a zombie outbreak,” there’s some basis for their leeriness.

Longer-term, though, HMOs have “steady returns on equity,” Einhorn pointed out, and within that universe, Cigna is better positioned than many of its peers. Current medical costs, he said, already reflect the impact of new regulations, and the aspects of the health-care insuring likely to be worst hit by Obamacare are some of the smallest portions of Cigna’s model. (Read More: Obamacare: Winners and Losers in the Health Sector.)

Moreover, while turmoil in Europe is affecting many service providers, Cigna isn’t one, Einhorn added, showing a slide listing factors that won’t impact HMOs, including “Greek debt contagion,” “PIIG flu,” and “Euroerectile dysfunction.” In fact, he said, Europe is a place where Cigna’s business could expand over time — along with the Middle East and Asia.

Similarly, Einhorn touted the automaker GM as a stock that is seen as an “ugly duckling” to the market that is nonetheless “much healthier now” than just a few years ago, when it filed for bankruptcy protection. The hedge-fund manager ran through a laundry list of attractive aspects to the stock, including an improved cost structure, a cleaner balance sheet, and pension and health-care liabilities not nearly as big as investors seem to fear.

He also factored in politics in the U.S. and Europe. The notion that the U.S. government’s continued ownership of GM is a huge problem, Einhorn indicated, is essentially a canard, given that the government, in his view, is not actively involved in management decisions and will likely sell its stake very quickly if Mitt Romney is elected president.

Even if President Barack Obama wins re-election and the selldown is slower, Einhorn added, there are ways around the U.S. ownership problem — including a “large, open-market buyback program” that would reduce the size of the float of GM’s stock, potentially boosting shares.

Einhorn added that owning GM might be a way to win an advantage in Europe, where carmakers in general are facing problems. (Read More: Car Makers Turn to New Technology, Models to Fight Europe Slump.)

Despite the slackening demand on that continent, GM is better positioned than its rivals, the hedge-fund manager said, and may get to break-even within about three years. (Some auto industry watchers were puzzled by Einhorn’s thesis for GM in Europe, given that the company is expected to lose a billion or more dollars there this year and there’s no clear path to profitability. But Einhorn declined to respond to a request for additional comment.)

—By CNBC's Kate Kelly