| David Einhorn, Greenlight Capital (photo credit: Christopher Goodney/Bloomberg) |
David Einhorn’s Greenlight Capital got off to a strong start in the second half of 2017. As a result, its long-short, sometime-activist eponymous flagship fund has nearly erased its loss for the year. This serves as temporary relief for Einhorn, whose firm suffered about $400 million in redemptions at the end of the second quarter. The fund posted a gain of 2.1 percent in July, its best month of the year, enabling it to cut its loss for the year to just 0.20 percent.
Einhorn’s long portfolio came through in a big way in July. Four of its five largest positions posted very strong gains last month, more than offsetting the short book, which continued to cut into gains.
For example, CONSOL Energy, the coal and natural gas producer, surged 12 percent, sharply cutting its 18 percent loss in the first half of the year. Greenlight points out in its second-quarter letter that the company has committed to sell or spin off its coal business by the end of the year, which will enable investors to view the remaining company as a pure-play coal company by year-end.
Aircraft leasing giant AerCap Holdings, which gained 11.5 percent in the first half of 2017, returned another 5.8 percent in July. In the second-quarter letter, Greenlight points out AerCap announced a new $300 million stock buyback, which it plans to complete by the end of September. In the previous two years it bought back 23 percent of the stock.
Shares of General Motors added 3 percent in July. “We continue to believe that the market is overestimating GM’s vulnerability to the next down-cycle and is underestimating its longer-term competitive position, the impact of share repurchases and its current earnings power,” Greenlight told clients in the letter.
Meanwhile, the price of gold climbed 4.15 percent for the month after jumping 8 percent in the first half of the year.
The only loser among Einhorn’s top long holdings was Bayer, the global life sciences company. It fell 5.2 percent for the month. However, the stock returned more than 27 percent in the first half of the year.
The story was mostly the same in the short book in the first half of the year. Many of its biggest, most high-profile positions rose in price last month and therefore cut into the portfolio’s gains.
The only bright spot among this group was Tesla, the electric car maker. Its stock fell 10.6 last month. It was up 30 percent in the second quarter.
Otherwise several stocks from its so-called bubble basket of hot stocks it’s shorting continued their ascent. For example, streaming video giant Netflix surged 22 percent, while Amazon.com gained 2 percent.
Athenahealth, the medical software company, gained 2.3 percent. Paul Singer’s Elliott Management took a large long position in the stock in May.
Meanwhile, Caterpillar gained 6 percent last month. “Bulls believe that current results are closer to trough and the peak lies years ahead,” Greenlight stated in the letter. “We see it differently.”
Continental Resources, a short identified by Greenlight in its second-quarter letter, gained 3.4 percent in July. However, keep in mind it plunged 29 percent in the second quarter.
