Billionaire David Einhorn is one of the most-followed Wall Street activist investors and the founder of Greenlight Capital. Greenlight under Einhorn’s leadership managed to generate annualized returns of 16.5% since inception in May 1996. This year, Einhorn will be one of the speakers at the 2016 Ira Sohn Conference. Einhorn often appears at the event, which is one of the most anticipated in the investment community and he usually presents some of his best short ideas. Last year, Einhorn talked about fracking and pitched a short on Pioneer Natural Resources (NYSE:PXD), whose stock slid by 15% since the presentation. ST. Joe Co (NYSE:JOE), another Einhorn’s short idea presented at the last year’s Ira Sohn is down by around 3%. On the other hand, athenahealth, Inc (NASDAQ:ATHN), a stock that Einhorn had been pitching as a short for a couple of years, having said at one point that it could fall by as much as 80%, has been surging. With this in mind, let’s take a closer look at Einhorn’s recent performance as well as some of his short and long picks to give you a better idea about his upcoming presentation at the Ira Sohn Conference on May 4. As a sidenote, we have also prepared a short presentation about the 2016 Ira Sohn Conference and included a list of speakers that you can find here.
Even though Greenlight had a strong performance over the years, in 2015 the fund lost over 20% net of fees and expenses. In its fourth-quarter letter to investors, Greenlight highlighted the main reasons behind the losses, which included long positions in Micron Technology, Inc. (NASDAQ:MU) and CONSOL Energy Inc. (NYSE:CNX) and short bets against two stocks that ranked among the best-performing in the S&P 500: Netflix, Inc. (NASDAQ:NFLX) and Amazon.com, Inc. (NASDAQ:AMZN). Sunedison Inc (NYSE:SUNE) was another top pick in Greenlight’s portfolio that tanked last year and dramatically affected its returns.
“[…] our worst performing investments were among our biggest positions. These aren’t our first big losses nor are they likely to be our last, and while our goal is to minimize them, they come with the territory of running a concentrated portfolio. In 20 years we’ve had 21 instances of a position costing us more than 3% of capital in a calendar year. Other than the awful bear market of 2008, when we had five losers of this magnitude, we’d have to go back to 2002 to find a year when we had as many as two. Most years we’ve had none or one.
This year we had three (CNX, MU and SUNE). Nothing distinguishes these from our other large losers in prior years. What’s unusual is that they all happened at around the same time. Having three in a single year is both unfortunate and too many for us to be able to succeed,” Greenlight said in its fourth-quarter letter to investors.”
We have analyzed Greenlight’s 13F portfolio at the beginning of this year and our calculations, that took into account the weighted average returns of the fund’s positions in companies worth over $1.0 billion, showed that the fund’s 13F portfolio gained 3.9% during the first quarter. One of the highlights of the quarter, was the fund’s stake in Consol Energy, which surged by 43% during the first three months of the year. According to its third-quarter letter, Greenlight expected Consol to start generating cash this year and it considered the stock to be undervalued since the market failed to overlook the company’s initiatives in reducing costs and its proved natural gas reserves.
