| David Einhorn, Greenlight Capital (Photographer: Michael Nagle/Bloomberg) |
Friday was a bittersweet day for David Einhorn’s Greenlight Capital, especially when it comes to its short portfolio.
On the last day of the month alone, shares of Athenahealth, one of its high-profile short positions, plummeted more than 19 percent after the health care computing services company reported that its claims and collections revenues fell in the first quarter. You would think this would have enabled the hedge fund firm’s flagship fund to post a strong gain for the month.
On the other hand, many of Greenlight’s so-called bubble basket of stocks it is shorting continued to surge, helped in part by strong earnings reports. Its long book did not exactly help the cause last month either. As a result, the New York long-short firm’s eponymous hedge funds posted a 1 percent loss in April, cutting its gain for the year to a mere 0.30 percent.
In April, the Standard & Poor’s 500 stock index posted a 1.1 percent gain, the Dow Jones industrial average rose 1.2 percent, and the Nasdaq Composite rose 2.9 percent.
The short book has been plagued all year by the stocks that have been boosting the returns of many of the so-called TMT investors — those that emphasize technology, media, telecom, and internet stocks.
For example, shares of Amazon.com, which Greenlight has admitted to shorting in the past, rose about 3.3 percent in April and are up more than 23 percent for the year. Tesla, another losing short position, rose about 13 percent in April and is now up 47 percent for the year. And while streaming video giant Netflix was up less than 3 percent in April, the stock is up about 23 percent for the year, making it one of the hedge fund’s biggest losing positions.
As we reported earlier, Greenlight has been hurt this year by many of its short positions. In its first-quarter investor letter dated April 25, it told clients it lost money from shorting the bubble basket and Tesla. For one thing, the kinds of stocks in its so-called bubble basket are the ones that have been going up this year and fueling the strong gains being reported by many of the tech and internet oriented long-short managers.
“A number of these stocks are back in full-blown momentum mode,” Greenlight lamented in its letter. “There was no catalyst that we know of that burst the dot-com bubble in March 2000 and we don’t have a particular catalyst in mind here. That said, the top will be the top and it’s hard to predict when it will happen.”
Meanwhile, entering April the largest disclosed long positions were AerCap, Bayer, CONSOL Energy, General Motors, and gold.
Bayer, the global life sciences company, returned nearly 8 percent for the month and was up nearly 12 percent for the year. However, aircraft leasing giant AerCap Holdings was flat for the month but is up more than 10 percent for the year.
General Motors, one of Greenlight’s more recent high-profile activist targets, declined 2 percent last month. Greenlight 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.
Meanwhile, CONSOL Energy, one of Greenlight’s top winners last year, tumbled 9.5 percent for the month and is down nearly 17 percent for the year.
Its biggest winners in the first quarter also didn’t not help much. Apple was flat for the month, gold was up about 0.7 percent, and Chemours Co., the specialty chemicals company spun out of DuPont, gained 4.4 percent.
