David Einhorn, CEO of Greenlight Capital Re, Ltd. (NASDAQ:GLRE), might be the best short seller ever. Whenever, Einhorn mentions something negative about a stock it sometimes drops over 10%. Not only that, but the fact that Einhorn does NOT mention a stock gives it a big boost.
A recent example is Herbalife Ltd. (NYSE:HLF). David Einhorn asked about previous 10-K fillings, specifically how the company counts distributors, consumers and other clients. The 36 second question sent the stock down 19% in the after-hours market.
Shortly after the Herbalife Ltd. (NYSE:HLF) incident, Einhorn spoke at the Ira Sohn Conference. During his speech he didn’t mention Herbalife once. The company’s stock had jumped by about 17% by the end of the conference. Einhorn’s reputation and ability are so striking that his leaving a company out of a speech can help their shares skyrocket.
At this year's Sohn Investment Conference, Dan Sundheim, the founder and CIO of D1 Capital Partners, spoke with John Collison, the co-founder of Stripe. Q1 2021 hedge fund letters, conferences and more D1 manages $20 billion. Of this, $10 billion is invested in fast-growing private businesses such as Stripe. Stripe is currently valued at around Read More
On the other hand, as Herbalife found out just before Ira Sohn, Einhorn’s word can bring company’s stock to its knees. Unlike Herbalife, the companies often stay there. The most infamous of these did not crash simply because of Einhorn’s influence, but he made a great deal of money in the process and was one of the first to realize what was going on.
In July 2007 David Einhorn made a controversial call, he was shorting Lehman Brothers. He didn’t announce that position until April of the following year when the bailing out of Bear Stearns signaled the real beginning of the crash.
Einhorn had foresight with Lehman. He saw their exposures and their under capitalization and thought their financial accounting was dubious. Einhorn is still often cited in main stream news as the man who shorted Lehman and it’s obvious why. He saw coming what everybody else refused to.
In the Autumn of 2010 at the Value Investing Congress, Einhorn was at it again. This time his target was a smaller beast, The St. Joe Company (NYSE:JOE). When Einhorn’s dislike of the company became known of that year shares dropped over 10%. A cursory look at the company’s chart today show’s trading at just under 16. At the time Einhorn believed the company was worth no more than $7-$10.
St Joe is a Florida real estate developer. Einhorn distrusted the company’s business model believing its biggest assets, land holdings, to be completely overvalued. The market took him up on his sentiment after some time and despite support from Bruce Berkowitz the company’s stock dropped.
Green Mountain Coffee Roasters Inc. (NYSE:GMCR) was a company Einhorn saw missing the markets expectations. He brought them up at the Value Investing Congress in New York last year and the firm’s stock had tumbled by 13% before noon that day. Einhorn made a huge presentation on the firm’s dodgy governance and vulnerable business model.
The market was blown away and the company still hasn’t recovered. The previous Friday the stock closed at $92.09. After a series of Einhorn prediction coming true the company is now trading at around $25. That’s a real impact.
David Einhorn has the insight into companies that lets him see when they are failing and when the market sees it. He also has a reputation which affords him the ability to make a stock slide by simply telling everybody it’s bad news. Look at Herbalife. The next company Einhorn goes after, and he’s started on St. Joe again today, will have to watch out.
To hear Einhorn’s next great short idea before the stock drops 20%, readers can get a nearly 50% discount off the upcoming Value Investing Congress. Bill Ackman likely will be speaking, and there will be an all star line up. Just use Discount Code: N12VW3 for $2,200 savings. Act before 6/5/12