Einhorn Lost Money on Long and Short Wagers in First Quarter

(Bloomberg) -- David Einhorn’s Greenlight Capital lost money across the board in the first three months of the year, marking one of the worst quarters for the legendary manager.

Einhorn told his investors Tuesday that the market went against his largest wagers, with his long positions losing money despite posting positive earnings, and his short bets climbing while missing earnings. In an analysis of his largest stock wagers, Einhorn said his 20 biggest long positions fell 5.6 percent, and his 20 largest shorts fell 5.5 percent. Greenlight’s flagship fund dropped about 14 percent in the first quarter, Bloomberg reported Friday.

“It is difficult to explain what caused the results,” he said in the letter. “Despite recent results, our portfolio should perform well over time. To some extent, this quarter’s result stems from the continued extreme outperformance of growth over value.”

Einhorn, 49, said on a conference call last month that his hedge fund was experiencing its worst underperformance ever. Greenlight has posted lackluster returns in recent years as markets, especially for growth stocks, have risen while the hedge fund has stuck to its value-investing strategy.

General Motors Drops

Einhorn cited the example of General Motors Co., of which he owns a 1.85 percent stake -- his biggest U.S. public equity holding, according to the latest regulatory filing. While the company rallied the day it announced strong earnings, it ended down 11 percent on the quarter, amid reports of declining sales among its bigger trucks and concerns about U.S. trade policy. He said the company’s “fundamentals appear favorable,” and added that “we just don’t see what the market may be saying, and we believe that GM is more likely to exceed near and immediate-term forecasts than to disappoint.”

While several technology stocks in the “bubble basket” Einhorn has said he’s betting against -- including Netflix Inc. and Amazon.com Inc. -- have sold off in recent weeks, the moves did little to help his portfolio. His fund still fell 1.9 percent in March.

The sole wager that generated more than 0.5 percent for Greenlight was memory-chip maker Micron Technology Inc., which rallied 27 percent in the first quarter. Einhorn mentioned Greenlight remains bullish on aircraft-leasing company AerCap Holdings NV, drugmaker Mylan NV and Brighthouse Financial Inc., which spun off from MetLife Inc. last year.

Greenlight sold its stake in chemical company Chemours Co. at more than four times the average price it bought the shares at in 2015, the letter said. The hedge fund also exited the German energy company Uniper SE at more than two times its initial purchase price in 2016.

Einhorn said he covered two shorts he put on in 2016, Hexagon AB and United Rentals Inc., both at a loss. Overall, he had an average net long exposure of 29 percent.

Analyst Gaurav Sharma left the firm as did its controller, Jamie Tully, who had been at the Greenlight for 11 years, the letter said.

Jonathan Gasthalter, an external spokesman for New York-based Greenlight, declined to comment.

To contact the reporters on this story: Katia Porzecanski in New York at kporzecansk1@bloomberg.net, Katherine Burton in New York at kburton@bloomberg.net.

To contact the editors responsible for this story: Margaret Collins at mcollins45@bloomberg.net, Vincent Bielski

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