SAN FRANCISCO Yahoo shares set a fresh 52-week high on Monday, following the news that investor David Einhorn's hedge fund took a long position in the Web search company and cited the attractiveness of Yahoo's stake in China's Alibaba Group.
Greenlight Capital, the hedge fund run by Einhorn, disclosed that it had taken a "significant" long position in Yahoo during the first quarter in a letter to shareholders on Friday, a copy of which was obtained by Reuters.
Shares of Yahoo traded as high as $18.34 on Monday, before closing the regular session up 2.5 percent at $18.14.
"Whenever you see David Einhorn as having a long or short position in the stock, it is going to naturally create activity given his impressive track record," said TD Ameritrade chief derivatives strategist Joe Kinahan.
"It would most certainly contribute to the stock going higher as well as many call options being traded with many people wanting to try to mirror his position," Kinahan said.
Greenlight President Einhorn first rose to prominence for making a prescient call on Lehman Brothers' accounting troubles before the firm's collapse.
Yahoo's options activity was brisk, especially on the call options, which give investors the right to buy the stock at a fixed price any time up until expiration.
Overall option volume was 2.5 times the average daily levels with about 144,000 calls and 38,000 puts traded in Yahoo on Monday, according to option analytics firm Trade Alert.
In Greenlight's letter, the firm identified Yahoo's 40 percent stake in China's Alibaba Group as Yahoo's "most valuable asset."
"We would not be surprised if Yahoo's 40 percent stake in Alibaba Group alone was ultimately worth Yahoo's entire current market value," the letter said.
A spokesman for Greenlight Capital declined to comment.
(Reporting by Alexei Oreskovic and Jennifer Ablan with additional reporting by Doris Frankel, Editing by Tim Dobbyn and Robert MacMillan)