The stock market may have suffered its worst quarter since 2022. But Greenlight Capital is providing some relief to investors.
After gaining 2.9 percent in March, the value-driven hedge fund headed by David Einhorn was up 8.2 percent for the first three months of the year. It is now beating the broad averages by a double-digit rate: The S&P 500 fell 5.8 percent in March and was down 4.6 percent in the first quarter, and the Nasdaq Composite lost 8.2 percent last month and is down 10 percent for the year.
Greenlight has benefited from its conservative positioning.
“We continue to be concerned about the overall valuation of the market and have maintained a lower-than-average net market exposure,” it told clients in its fourth-quarter letter, dated January 21 and seen by Institutional Investor. At year-end, Greenlight was just 90 percent long and 54 percent short, for a net long exposure of just 36 percent, according to the letter.
Greenlight also noted at the time that the market equity risk premium versus bonds was zero or slightly negative. “As such, we don’t think accepting a lot of market exposure makes sense,” it said.
As is usually the case, it is not known exactly what drove the returns in March and for the quarter, but Greenlight likely made some money on its short positions. Also, though the fund is known for its long-short strategy, its macro book also plays an important role. For example, when Greenlight lagged the overall stock market in 2024 with a 7.2 percent gain, the macro book kicked in the same 7.2 percent to performance.
Several of Greenlight’s long positions are also doing well this year. For one, even though annuities seller Brighthouse Financial lost 2.2 percent in March, it was up about 21 percent for the quarter. Diversified homebuilding and land development company Green Brick Partners, which accounted for more than one-quarter of U.S. long assets at year-end, dropped 2.4 percent last month but has risen 3.2 percent for the year.
Two international stocks that rank among the top-five holdings were big contributors for the year, despite mixed success in March. Lanxess, a German specialty-chemicals company, declined 3 percent last month but surged 18 percent for the quarter. Belgian chemicals company Solvay was up 1 percent in March and more than 5 percent for the quarter.
Remarkably, even though Greenlight climbed 8.2 percent for the quarter, seven of its ten largest U.S. common stock long positions were down by double digits.
Core Natural Resources lost 28 percent in the quarter. Core is the company resulting from the January 14 merger of CONSOL Energy — Greenlight’s second-largest long position at year-end — and Arch Resources.
Entertainment and gaming company PENN Entertainment was down 24 percent for the quarter after falling 18 percent in March. Viatris, a pharmaceuticals and health care company, dropped 30 percent in the first quarter, and exercise equipment company Peloton declined 27 percent. IT company HP lost more than 15 percent, and life sciences company Roivant Sciences was off a little less than 15 percent.
