| David Einhorn, president of Greenlight Capital Inc. (Photo credit: Andrew Harrer/Bloomberg). |
Greenlight Capital suffered a setback in March in its battle to get back to its high-water mark.
The flagship long-short hedge fund, managed by David Einhorn’s firm of the same name, is solidly lagging the major indexes for the first three months of the year. The Standard & Poor’s 500 stock index is up 5.53 percent, while the Dow Jones industrial average is up 4.9 percent. By contrast, Greenlight Capital lost 0.5 percent last month. This trims its gain for the year to 1.5 percent. The firm declined to comment.
Greenlight has produced mixed results on both the long and short sides of its book. By far its biggest winner has been the Chemours Co., the specialty chemical company that spun out of DuPont; it was one of Greenlight’s biggest gainers in 2016. It returned 14.2 percent in March of this year and is up a whopping 75 percent for the first three months of the year.
Otherwise, three of Greenlight’s five largest disclosed long positions entering March made money for the month, while four of them were profitable in the quarter. For example, aircraft leasing giant AerCap Holdings returned 1.5 percent in March and is up 10.5 percent for the year. Bayer, the global life sciences company, rose 4.6 percent in March and is up 10.6 percent for the year.
On the other hand, Consol Energy, one of Greenlight’s top winners last year, added 7.8 percent for the month. However, the coal and natural gas company is down 8 percent for the year.
On the other hand, Greenlight’s bet on gold declined slightly last month but is up 4.3 percent for the quarter. Meanwhile, General Motors Co. slid 4 percent last month but is up 1.5 for the year. Last week Einhorn stirred up some controversy when he published a case for GM creating two classes of stock: one that would pay a dividend and one that would presumably be on a growth track. His argument: The market is not fully valuing the stock, which has a dividend yield of 4.4 percent.
“Creating two classes of common stock will unlock GM’s value by forcing the market to appropriately value the dividend and give credit for GM’s earnings potential,” Greenlight asserted. However, GM made it very clear it disagreed with his analysis.
Greenlight has been especially hurt by its high-profile short bets, which is not surprising given the market’s strong performance for the quarter. However, several of its shorts — especially those that are part of the so-called bubble basket — rose by multiples of the S&P 500’s gains for the three-month period.
For example, e-commerce giant Amazon.com gained 4.9 percent in March and has returned about 18 percent for the year. Streaming video giant Netflix climbed 4 percent last month and is up 19.3 percent for the quarter.
And while Athenahealth fell 4.4 percent in March, the health care computing services company is still up 7.1 percent for the year. Pioneer Natural Resources Co., the so-called mother fracker stock, was roughly flat last month but is up 3.4 percent for the year.
On the other hand, Caterpillar, a recent addition to Greenlight’s short book, was down 4 percent in March and is flat for the year.
