From FT Alphaville:
David Einhorn, in search of lost time
David Einhorn's hedge fund Greenlight Capital is having a difficult year. To date, the storied fund has returned -13.6 per cent net of fees and expenses versus the -0.8 per cent return of the S&P 500.
Seemingly befuddled by the performance, Mr Einhorn struggled to ascribe blame to any fundamental errors or systematic issues in his Q1 letter sent to investors yesterday;
In our history, we've had five other quarters with a greater than 5 per cent loss. In four of those, there were clear world or market events that provided a simple explanation, and in one, a few positions in our portfolio went wrong at the same time. This period has been like any of those.Mr Einhorn goes onto explain the performance by focusing on the 20 largest long and short positions, and how they performed after missing or beating their respective earnings expectations:
...the longs that met or exceeded expectations (representing 89 per cent of capital) advanced around 2 per cent and those that missed (17 per cent of capital) fell about 8 per cent. For the shorts, those that met or exceeded expectations (representing 29 per cent of capital) rose 7 per cent and those that disappointed (28 per cent of capital) fell almost 5 per cent.All good then?
Well not quite, after performing well post-earnings these positions reversed dramatically. For instance car-creator General Motors, the largest long position in the fund at 19.2 per cent of capital, according to Greenlight's last 13-F filing, beat earnings before suffering a 18 per cent draw-down over the quarter....MUCH MORE