Einhorn closed J.C. Penney short in Q2 -letter

NEW YORK, July 26 Fri Jul 26, 2013 1:58pm EDT

NEW YORK, July 26 (Reuters) - Hedge fund manager David Einhorn closed a bet against ailing retailer J.C. Penney Co Inc in the second quarter and also closed a long position in software company Microsoft Corp, according to a quarterly note to investors in his Greenlight Capital.

Einhorn said the short bet against J.C Penney was the $8 billion firm's "most profitable short of 2012." When a hedge fund manager is short a stock he believes the value of the shares will fall. If he is long, he believes the stock will rise in value.

"Though the retailer was poorly positioned, the shares rocketed in early 2012 based on overhyped promises put forth by a highly promotional CEO," Einhorn said of J.C Penney in the letter, dated July 26. "We doubted the new strategy would succeed. We covered when the Board fired the CEO before he could turn the company into a penny stock."

Greenlight also closed a long position in Microsoft during the quarter.

"Windows 8 appears to be a flop, and a decade of mismanagement has put Microsoft at risk of becoming a shrinking company," the letter said.

Greenlight gained 1.2 percent net of fees in the second quarter, bringing yearly gains to 7.1 percent, according to the letter.

At quarter end the firm's largest disclosed long positions included Apple Inc, General Motors Co, gold and Marvell Technology Group Ltd.

Einhorn did not elaborate in the letter about the firm's bet on gold. Greenlight's offshore gold fund fell 11.8 percent in June, bringing year-to-date losses in the fund to 20 percent, Reuters has reported.

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