Einhorn Says Greenlight Results ‘Far Worse’ Than We Imagined

(Bloomberg) -- Hedge fund manager David Einhorn said his firm’s results for the second quarter were “far worse than we could have imagined” but he hasn’t lost faith in value investing.

“Right now the market is telling us we are wrong, wrong, wrong about nearly everything,” Einhorn wrote in a letter from Greenlight Capital to clients dated July 31. “And yet, looking forward from today we think this portfolio makes a lot of sense.”

Conceding that his firm has made some “obvious mistakes,” Einhorn said: “One of our general goals is never to be your biggest problem. Unfortunately, we have been lately, and a good number of our partners have had enough and redeemed.”

Greenlight Capital’s hedge funds fell 5.4 percent in the second quarter, according to the letter, bringing the year-to-date loss to more than 18 percent. In a separate letter, the firm later told clients its main fund declined 0.3 percent in July, bringing its loss for the year’s first seven months to about 19 percent.

Einhorn reminded investors that maximizing capital has never been the firm’s goal, rather it’s “maximizing returns,” adding in the quarterly letter that Greenlight has raised about $6 billion and paid out about $8 billion to investors over the lifetime of the firm.

Here are some of the other highlights:

  • Despite shorting the company for years, Einhorn said Athenahealth Inc. hasn’t been a “material loser in 2018” because the hedge fund’s been able to trade around its holding. The money manager said he’s dubious that the activist shareholder that forced out the company’s CEO -- Elliott Management Corp. -- will actually buy the company, and said Greenlight took advantage of a recent spike in the company’s share price to re-short more shares.
  • Einhorn said that he was not renewing his Tesla Model S lease and “is excited to get the Jaguar I-PACE, which has gotten excellent reviews.” He described Elon Musk’s behavior over the quarter as “erratic and desperate” and noted Tesla Inc.’s production problems. “We doubt the entry-level Model 3 will be produced profitably anytime soon, if ever,” he said.
  • General Motors Co.’s share price has been “another source of frustration.” Markets haven’t paid enough attention to what Greenlight sees as good news: a restructuring of the company’s Korean operation, the retirement of the chief financial officer, and most importantly, an investment from SoftBank Group Corp. in its autonomous driving unit, Cruise Automation.
  • At the end of the second quarter, Greenlight’s largest disclosed long positions were Bayer AG, Brighthouse Financial Inc., CNX Resources Corp., GM and gold.

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