Apple’s Stock Drop Might Bite Hedge Funds Badly

hedge-fund-ETFAccording to Forbes’ Nathan Vardi, last year the billionaire hedge fund  manager David Einhorn predicted that Apple’s market capitalization could hit $1 trillion. He long ago made Apple one of his hedge fund’s biggest holdings and in a letter dated just two days ago Einhorn told his investors he had purchased more Apple shares as the price declined late last year. “We used the lower prices as an opportunity to repurchase the shares we sold in the third quarter,” Einhorn wrote.

Einhorn’s hedge fund was down 4.9% net of fees in the fourth quarter of 2012, thanks partly to the performance of Apple’s shares. “Our Apple was bruised,” he noted to his investors. The question now is, will Apple sink Einhorn and other hedge funds in 2013?

Einhorn’s hedge fund peformance, by his own account, was “pedestrian” last year. Like most hedge funds, Einhorn’s Greenlight was up in 2012, but it underperformed the U.S. stock market. In Einhorn’s case he was up 7.9% net of fees while the S&P 500 returned 16%. That’s actually a little better than the average hedge fund.

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