By Svea Herbst-Bayliss
BOSTON (Reuters) - Hedge fund manager David Einhorn, whose picks are closely watched on Wall Street, said he is betting against supermarket chain Safeway Inc but still likes his biggest holdings, including Apple Inc.
Einhorn's Greenlight Capital told investors in a letter seen by Reuters that gains in Micron Technology, Apple and SunEdison Inc helped push its funds up 7.9 percent during the second quarter, leaving it with gains of 6.4 percent for the first half.
It also described short positions against Safeway, Questcor Pharmaceuticals Inc, cigarette maker Lorillard Inc and Martin Marietta Materials Inc, all of which have been involved in what Einhorn calls "takeover season." Questcor "was the only significant loser in the portfolio," the letter said.
A spokesman for the firm declined to comment.
Einhorn also hinted at a future short bet by saying, Mallinckrodt Pharmaceuticals Plc, which agreed to buy Questcor, "is setting itself up to be a very attractive short sale candidate if the merger is completed." Questcor makes only one product and Mallinckrodt will have to use borrowed money to buy its target, the letter said.
Earlier this year, Einhorn and other fund managers caused a stir by suggesting that another bubble is building in technology stocks. "Nothing could be further form the truth," he wrote in Friday's letter, noting that many of his largest bets are in the technology sector. "We believe that stocks including Apple, Lam Research, Marvell Technology and Micron Technology have strong prospects are undervalued."
He also said the firm made a medium-sized new investment in semi-conductor capital equipment maker Lam Research Corp, noting that the firm bought the shares at $54.07. They closed the quarter at $67.58.
The fund sold out of positions in Aspen Insurance Holdings and Rite Aid because their "shares reached fair value."
(Reporting by Svea Herbst-Bayliss; Editing by David Gregorio and Steve Orlofsky)