Greenlight Capital last year posted its worst results since 2020.
The hedge fund firm headed by David Einhorn was up just 7.7 percent in 2024, less than one-third of the 25 percent gain generated by the S&P 500 index, according to Greenlight’s fourth-quarter letter, obtained by Institutional Investor.
Although Greenlight is best known as a long-short value-driven firm, its macro book made the largest contribution to net gains, 7.2 percent. Long positions kicked in 5 percent, whereas shorts detracted 3.9 percent and short index investments subtracted 1.2 percent from performance.
“We continue to be concerned about the overall valuation of the market and have maintained a lower-than-average net market exposure,” Greenlight stated in the letter, noting it had been up by double digits in early August. It noted that in the latter part of the year, the market environment for its strategy turned from favorable to unfavorable.
At year-end, Greenlight was 90 percent long and 54 percent short for a low 144 percent gross exposure and a 36 percent net long position. Its best investment last year was gold, which gained 27 percent, Greenlight said, adding that it supplemented its direct holdings with call options.
Other big winners for the year were IT infrastructure services provider Kyndryl Holdings, exercise bicycle maker Peloton, and Tenet Healthcare, an operator of hospitals and ambulatory surgery centers.
Greenlight, however, said several “unfortunate events” hurt last year’s performance. For example, the Federal Trade Commission blocked the sale of fashion giant Capri Holdings to Tapestry; computer maker HP issued weak guidance; and Belgian chemicals company Solvay reported earnings that raised questions about the quality of its results. Meanwhile, homebuilder Green Brick Partners, Greenlight’s largest long for many years, was hurt over concerns that homebuilding is slowing down as interest rates rise.
Heading into the new year, Greenlight made a number of changes to its long portfolio. Most significantly: German specialty chemicals company Lanxess cracked the firm’s top-five long holdings for the first time. It is not clear whether Greenlight previously held a position in the stock or what the investment’s size is.
As a result, two of Greenlight’s five largest longs are now Europe-based chemicals companies.
On Monday, Lanxess said it expected fourth-quarter earnings to exceed expectations by more than 20 percent, mostly thanks to U.S. customers buying before Donald Trump could institute tariffs. The stock is up about 14 percent for the past week.
In the fourth quarter, Greenlight also initiated or fully unloaded a number of midsize positions. For instance, the hedge fund invested in CNH, a maker of agricultural machinery. Although the farm equipment industry is in a down cycle, Greenlight is “optimistic” that the current downturn will be shorter and shallower than the one a decade ago. It paid an average price of $10.53 per share, or less than 11 times expected bottom-of-cycle results, according to the letter.
The hedge fund sold its positions in LivaNova and retailer ODP Corp., each at a loss. It also fully unloaded Tenet Healthcare after two years at a 99 percent internal rate of return. “With the valuation at a more reasonable level and the possible risk that the Trump administration might be less friendly to this sector, we decided to declare victory,” the letter said.
