(Adds details on bets, other parts of letter)
By Svea Herbst-Bayliss
BOSTON, Oct 24 (Reuters) - Hedge fund manager David Einhorn told investors on Tuesday that his Greenlight Capital made three new investments during the third quarter, including a new bet on chip maker Micron Technology Inc.
Micron had weighed on Greenlight's performance a few years ago and Greenlight exited the investment late in 2015. In this reunion, the fund bought the stock at $29.21, Einhorn said in his quarterly letter, which was seen by Reuters. The stock now trades at $41.57.
"While DRAM will always be cyclical, we believe investors are underappreciating the dynamics of the current cycle and the long-term structural improvements in the industry," the letter said.
In the first nine months of 2017, Greenlight gained 3.3 percent, trailing the S&P 500's 14.3 percent climb. Einhorn, who cemented his reputation by successfully picking undervalued stocks, wrote that the value investing strategy is challenging in the current market climate.
Greenlight also made new bets on premium mattress maker Tempur Sealy International, buying the stock at an average price of $56.11. The company's stock price tumbled earlier this year when it stopped selling through retailer Mattress Firm, a move Greenlight said may help the company because Mattress Firm was able to negotiate large discounts.
Greenlight analysts forecast that earnings could climb past $6 per share by 2019-2020, beating consensus expectations for $4.05 in 2019.
It also made a new bet on Hewlett Packard Enterprise at an average price of $13.29 a share and said it expects earnings could come in between $1.40 and $1.70 a share in the next years.
Einhorn acknowledged that he made a mistake on Best Buy , believing earnings would be hurt by weakness in the gaming cycle. Instead the company's strength in high-end computing helped boost sales and Greenlight exited its short position with a loss.
It also exited apparel company PVH Corp. with a gain.
Einhorn said that with growth stocks still surging, the current market "remains very challenging for value investing strategies." He wondered whether value investing remains a viable strategy.
"After years of running into the wind, we are left with no sense stronger than 'it will turn when it turns'." (Reporting by Svea Herbst-Bayliss; Editing by Susan Thomas and David Gregorio)