| David Einhorn, Greenlight Capital (Kholood Eid/ Bloomberg) |
It looks like David Einhorn’s Greenlight Capital continues to be heavily penalized by its flagship fund’s short book.
In fact, its negative bets fared so poorly last month that the fund, which bears the same name as Einhorn’s sometime-activist firm, is now back in the red.
Greenlight posted a 3.7 percent loss in May. As a result, it is down 3.3 percent for the year. In May, the Standard & Poor’s 500 stock index posted a 1 percent gain and is up 7.73 percent for the year.
The long-short fund continues to be badly hurt by its short bet against Athenahealth as well as from shorting many of the most popular long positions held by hedge funds, which Einhorn calls his “bubble basket” of stocks.
Shares of Athenahealth, a long-time negative bet, surged 37 percent last month alone. It did not help that in mid-May, Paul Singer’s Elliott Management Corp. disclosed it owned 9.2 percent of the medical software company. This sets up a showdown between the two high-profile hedge fund managers.
Meanwhile, Greenlight’s bets against several of the so-called bubble stocks also took a pounding. For example, shares of Amazon.com, which Greenlight has previously disclosed shorting in the past, rose about 7.5 percent in April and are up about 31 percent for the year. Tesla, another losing short position, rose 8.6 percent in May and is now up more than 50 percent for the year. Streaming video giant Netflix was up nearly 6 percent in May and is up nearly 30 percent for the year.
In its first-quarter letter, dated April 25, Greenlight told investors it lost money from shorting this group, noting: “A number of these stocks are back in full-blown momentum mode.” This situation has apparently not abated.
In addition, Caterpillar, a more recent short, gained 3 percent last month.
One bright spot in the short book: Pioneer Natural Resources, best known as the “mother fracker” stock, fell 3 percent and is down more than 6 percent for the year.
Meanwhile, Greenlight’s largest and most high-profile longs produced mixed results last month. For example, General Motors declined 2 percent in May. Greenlight has launched a proxy fight against the company. It has nominated three individuals to its board of directors and is pushing the auto giant to create two classes of stock: one that would pay a dividend and one that would presumably be on a growth track.
Entering April, GM was one of the hedge fund firm’s five largest disclosed long positions. The others were AerCap, Bayer, CONSOL Energy and gold.
Bayer, the global life sciences company, returned nearly 4 percent for the month and is up more than 19 percent for the year. Gold gained about 0.5 percent in May and is up about 10 percent for the year.
“Gold remains a long-term position with a thesis that global fiscal and monetary policies remain very risky,” Greenlight told clients in its first-quarter letter.
Apple, another major long position, rose more than 6 percent in May. In its first-quarter letter, Greenlight told clients Apple’s market position “is durable and its ecosystem is expanding with high-margin recurring services revenue streams.” It also called the iPhone maker a “superior company that still trades for less than a market multiple.”
Mylan, its sixth-largest U.S. long, gained 4.4 percent.
However, aircraft leasing giant AerCap Holdings declined by 4 percent for the month.
CONSOL Energy, one of Greenlight’s top winners last year, lost 6.5 percent last month. The coal and natural gas company is also down about 20 percent for the year.caterpillar
Chemours, the chemical company that was one of Greenlight’s biggest long winners last year as well as the first quarter of this year, fell less than 1 percent in May. Green Brick Partners, the residential real estate company, slid nearly 4 percent last month.
