Einhorn’s Greenlight wraps up a ‘very challenging’ last few days

Investing


Greenlight Capital’s David Einhorn said October started out strong but has ended on a sour note: He doesn’t expect to show gains for the month.

“The last few days have been very challenging,” the hedge fund manager said on a conference all Tuesday morning. Results for the month aren’t expected to be “materially different from zero.”

The fund is one of General Motors‘ biggest shareholders, with 3.7 percent of the shares, a position that had done well this year, rising 24 percent. But GM had a sharp sell-off this week when some prominent analysts questioned the sustainability of sales. Einhorn lost a proxy contest earlier this year to get seats on GM’s board.

Share prices of GM were up fractionally Tuesday, a day after falling 3 percent. They are down more than 6 percent in the last week, according to FactSet.

After the conference call another Greenlight holding hit turbulence: shares of the drug-maker Mylan dropped 8 percent Tuesday after a Bloomberg News report the company’s president was the target of a price-collusion investigation. Greenlight holds 2 percent of Mylan shares and already reported difficulty with it after delays in new drug approvals weighed on the stock.

But Einhorn said in last week’s investor letter that he was “excited about the upside potential,” citing Mylan’s generic drug offerings. Shares of Mylan are up 11.7 percent for the month but down 8 percent for the year.

Greenlight is also struggling with its “bubble short” positions, or bets against three high-flying tech companies it sees as having operational or profitability issues. Shares of Amazon are up 15 percent this month and 47 percent for the year, while shares of Netflix are up 8.7 percent for the month and 59 percent for the year. Tesla, on the other hand, is down 5 percent for the month. It is up 50 percent this year, however.

Last week, Einhorn sent out an investor letter that lamented the seeming end of value investing as a winning strategy. Value investors hunt for undervalued stocks of companies that are performing well. “Given the performance of certain stocks, we wonder if the market has adopted an alternative paradigm for calculating equity value,” he wrote in the letter.

Greenlight Capital gained 6.2 percent in the the third quarter and is up 3.3 percent for the year compared with the more than 14 percent gain in the Standard & Poor’s 500 this year.



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