David Einhorn bet on Apple before Steve Jobs' return - but quickly sold his shares and missed out on a massive profit

• David Einhorn bet on Apple before Steve Jobs returned as CEO in 1997 and revitalized the company.
• Einhorn's Greenlight Capital promptly sold its stake, missing out on a massive return.
• Greenlight built and exited a billion-dollar position in Apple between 2010 and 2018.

David Einhorn invested in Apple before Steve Jobs returned as CEO in 1997 and oversaw the launch of the iPod, iPhone, and other revolutionary products. But the investor promptly sold his shares for a 30% or 40% profit, meaning he missed out on a massive long-term gain.

"That's probably the worst sale of my entire career," Einhorn said on the "Invest Like the Best" podcast. "If we just kept that Apple stock at that value — because we were literally talking about a $1 billion company or something like that, we probably owned a couple percent of it — that would have been really awesome if we had just kept that."

Einhorn's Greenlight Capital likely paid a fraction of a dollar per Apple share, adjusted for four stock splits since the mid-1990s. The technology stock has soared from around 25 cents on a split-adjusted basis in 1997, to $161 as of Wednesday's close — a roughly 600-fold increase. Apple now commands a $2.5 trillion market capitalization, making it the world's most-valuable public company.

The Greenlight chief didn't say how much he invested. A $100,000 stake in Apple in 1997 would be worth over $60 million today, based solely on the stock's appreciation and ignoring dividends and any dilution. Greenlight declined to comment.

A second bite of Apple

Einhorn bought Apple stock again more than a decade after his first investment.

Greenlight reinvested in the company during the second quarter of 2010, purchasing a split-adjusted 8.75 million shares worth $79 million at the time, Securities and Exchange Commission filings show. That stake would be worth $1.4 billion today, as Apple's stock price has surged more than 15-fold since then.

Einhorn's fund boosted its bet by more than seven times, amassing as many as 67 million shares by 2013. The holding was worth around $1 billion then, making it the largest position in Greenlight's roughly $7 billion US stock portfolio. The same stake would be worth about $11 billion today.

The mainstream view at the time was that Apple's outsized profit margins would shrink due to fierce competition and smartphones becoming a commodity. Analysts also expected the company to fall by the wayside after Jobs' death in 2011. 

"Keep in mind, when we owned Apple, the consensus was it was a low-quality business," Einhorn said. "It was a one-hit wonder, that the founder died somewhere in the middle of our holding period and wouldn't be replicated, that the margins would be competed away and the company would essentially disappear."

However, Einhorn and his team recognized the stickiness of Apple's ecosystem of hardware, software, and services, and the immense value it provided to customers. Wall Street eventually embraced their contrarian view, and the tech stock surged.

Greenlight gradually pared its Apple wager and exited it completely in the third quarter of 2018. The stock more than quadrupled during its holding period, from below $10 a share to upwards of $44.

"We sat there for about five or six years with it as our largest position," Einhorn said. "We no longer hold the stock because I think everybody sees it the same way now."

Einhorn may have cashed in some of his Apple shares after they ballooned in value to avoid overconcentrating his portfolio in a single stock. Still, it's worth noting that Apple stock has roughly tripled since his exit. He may well regret selling the second time as well as the first.