By Katya Wachtel and Peter Rudegeair
NEW YORK (Reuters) - In a month when outspoken hedge fund manager David Einhorn went to battle with Apple Inc over the best use of the tech company's cash, his $8.8 billion hedge fund appeared to gain little from the effort in terms of performance.
Einhorn's Greenlight Capital rose a meager 0.3 percent in February, according to sources familiar with the number. Shares of Apple are have dropped roughly 5 percent since Greenlight went activist on the stock in early February.
Meanwhile, the benchmark Standard & Poor's 500 stock index advanced 1.1 percent last month.
Einhorn, who is one of the $2 trillion industry's closely watched investors, has been pushing Apple to return some of its massive cash stockpile to investors in a form of preferred stock. Greenlight owns roughly 1.3 million shares of Apple, and it is one of the New York-based firm's largest positions.
The feud between Einhorn and Apple comes at a time that Greenlight is struggling to keep pace with gains in the broader stock market.
Greenlight's flagship fund is up 3.7 percent for the first two months of the year, compared with a 6.2 percent gain for the S&P 500 stock index.
In 2012, Einhorn, who specializes in picking stocks to go long and short, saw his Greenlight fund lag the S&P 500 for the year, rising 8.3 percent compared with a 13.4 percent gain for the stock index. Hedge funds on average returned about 6 percent last year.
Einhorn has been a longtime holder and fan of Apple, even handing out iPod Nanos to investors as a gift in 2011. In 2012, his fund rode with Apple's stock as it reached an all-time high of $705.07 last September.
But since then, Apple's share price has fallen hard. The stock tumbled 24 percent in the latter half of 2012 and many notable hedge managers including Leon Cooperman and Daniel Loeb slashed their holdings.
Still, Einhorn has scored some success in his battle with Apple. The hedge fund won an injunction last week to halt a shareholder vote on a proposal that could have limited the company's ability to issue preferred stock.
On Friday, Greenlight dropped its lawsuit after Apple responded to the judge's ruling by agreeing to redo its proxy so the vote on preferred stock was not bundled with another measure.
"Apple removed the bundled proposal from the shareholder meeting, therefore resolving the issue," said Greenlight spokesman Jonathan Gasthalter.
Einhorn, who has argued for Apple to share more of its $137 billion cash stockpile with investors, wanted the company to issue what he called "iPrefs," or preferred shares with a perpetual 4 percent dividend.
So far in 2013, Apple shares have continued to languish, falling more than 20 percent to close at $441.40 on Thursday. The stock was down 2.2 percent at $431.64 on Friday afternoon.
At a time when Einhorn added to his firm's Apple holdings in the fourth quarter, hedge funds reduced their Apple positions by over 30 percent, according to a Goldman Sachs Group analysis of fourth-quarter regulatory filings.
American International Group Inc replaced the technology stock as the hedge fund industry's favorite stock in the three months through December 31, the first time Apple had been knocked from pole position in three years.
Daniel Loeb's Third Point, for example, got rid of Apple stock in the fourth quarter. His flagship Offshore hedge fund rose 1.3 percent in February, sending yearly returns to 6.1 percent, according to a person with knowledge of the numbers.
Barry Rosenstein's Jana Partners also sold its Apple stake in the fourth quarter. The fund, which tends to take activist stakes in companies and push for corporate change, lost 0.5 percent in February, but remains up 4.6 percent for the year.
(Additional reporting by Svea Herbst-Bayliss in Boston; editing by Matthew Goldstein, Lisa Von Ahn, Bernadette Baum and Matthew Lewis)