| David Einhorn, Greenlight Capital (Photo credit: Bloomberg) |
The hedge funds managed by David Einhorn’s Greenlight Capital surged in December. As a result, for the full year they were able to rebound sharply from the 20.2 percent loss they suffered in 2015.
Even so, the New York firm’s long-short, value-oriented funds — which sometimes engage in shareholder activism — are still solidly below their high water mark. Specifically, Greenlight’s funds returned 1.6 percent in December and 9.4 percent for the year. The gains were in line with the 9.5 percent return posted by the Standard & Poor’s 500 stock index. The Dow Jones industrial average rose 13.4 percent, while the Nasdaq Composite gained 7.5 percent.
This would generally be a very satisfying year for almost any hedge fund. However, Greenlight investors are well aware the funds did not even make up half of their losses from the previous year.
The shortfall is even worse for Greenlight’s newest investors. If you recall, Greenlight reopened the funds to existing investors on Nov. 1, 2014 and to new clients on Dec. 1, 2014.
In December 2014, Greenlight lost about 1.9 percent, after posting gains of 5.5 percent to 5.8 percent in its three main funds in November 2014. The reality is that Greenlight needs to do better in 2017 than it did in 2016 just to get back to break-even.
In any case, Greenlight’s two best-performing long holdings last year were chemical company Chemours and CONSOL Energy, a coal and natural gas company, even though both stocks suffered sharp setbacks in December. Chemours more than quadrupled in price last year, despite dropping more than 10 percent in December.
Greenlight is the largest shareholder of the company, which was created when it was spun off from DuPont in July 2015. Chemours was Greenlight’s sixth-largest U.S. long stock position at the end of the third quarter.
CONSOL Energy surged 130 percent last year, although it fell more than 11 percent last month. The stock was Greenlight’s fourth-largest U.S. long position at the end of the third quarter.
Greenlight was able to enjoy strong performance in December even though one of its high-profile shorts surged in price for the month. Shares of Athenahealth rose more than 11 percent in December, climbing 23 percent on one day alone after the company reaffirmed that it expected to be a $1 billion company by the end of 2016. For the year, though, the shares of the healthcare computing services company were off by about 35 percent.
Even Greenlight’s big long bet on gold paid off last year despite its recent setback. The price of the metal was up about 8.5 percent for the year, even though it was off about 14 percent in the second half of the year.
However, Pioneer Natural Resources, which will forever be known as Einhorn’s “mother fracker” short, turned out to be a disaster last year. The stock returned about 44 percent for the year, despite dropping nearly 6 percent in the final month.
