Earlier today, we broke the news about David Einhorn’s Q4 shareholder letter. The letter discusses the major winners and losers for David Einhorn’s Greenlight Capital Re, Ltd. (NASDAQ:GLRE) in 4Q2012. Greenlight Capital’s funds lost almost 5 percent in the last quarter and finished the year up 7 percent.
Pointing out what went wrong for the firm, the investor letter mockingly remarks,“Our coffee was too hot, our apple was bruised and our iron supplements didn’t go down smoothly”.
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It is pretty clear which investment each phrase is referring to, except perhaps the last one. It would be great if the “iron supplements” were referring to Herbalife Ltd. (NYSE:HLF) and its vitamin shakes, as it would solve a lot of confusion that Ackman-Loeb-Icahn triangle has created, but it does not look like that. Greenlight incurred losses from its short positions in iron ore related companies in Q4. Julia La Roche from Business Insider also arrived at the same conclusion. Moreover, in the time between Einhorn’s May phone call in Herbalife Ltd. (NYSE:HLF)’s earnings conference and Dec 2012, HLF has declined sharply in value. So it is unlikely that Greenlight Capital could suffer any losses from this speculated short position. However, the short cannot be too large of a position since almost all the shares sold short are held by Ackman.
Interestingly, the letter mentions that the funds slumped due to the rally seen in the European sovereign debt. Greenlight’s macro portfolio lost 4 percent overall in 2012, a chunk of this underperformance came from Einhorn’s bets against the European sovereign bonds. The bearish take on government debt is unique, as lately the debt of Greece and other European periphery countries have become hot commodities and is looking more and more like a profitable long investment among hedge funds like, Dan Loeb’s Third Point, Odey Asset Management, Pharo Macro and Argonaut Capital. While we have no idea which country was the target of Greenlight’s short in European sovereign debt, Greece and Portugal are possibilities.
In a nutshell, Greenlight Capital lost in long positions in Apple Inc. (NASDAQ:AAPL), Marvell Technology Group Ltd. (NASDAQ:MRVL) and Gold, and shorts in Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR). The gaining position was long in General Motors Company (NYSE:GM). However, on a full year basis, Einhorn’s major profit contributors were Apple Inc. (NASDAQ:AAPL), Sprint Nextel Corporation (NYSE:S), Seagate Technology PLC (NASDAQ:STX) and General Motors Company (NYSE:GM).
Despite the losses in long equities, Greenlight has not reversed its bullish thesis on any of these holdings. Einhorn has a lot of faith in Apple Inc. (NASDAQ:AAPL) and Marvell Technology Group Ltd. (NASDAQ:MRVL). Moreover, Vodafone Group Plc (NYSE:VOD) (LON:VOD) was discussed in detail in the investor letter. The fund believes that the market has not realized the value of Vodafone Group Plc (NYSE:VOD) (LON:VOD)’s 45 percent stake in Verizon Wireless. VOD is a largely independent company and has the ability to buy all ownership of Verizon Wireless. Despite outstanding fundamental standing, Vodafone Group Plc (NYSE:VOD) is still held at a much lesser value, compared to Verizon.
The Q4 letter also lists Greenlight’s bullish opinion of Computer Sciences Corporation (NYSE:CSC). The fund has continued to build up on its position in Computer Sciences Corporation (NYSE:CSC) since February 2012 till the end of the year at the average price of $27.78. Einhorn believes that the stock was undervalued compared to its peers, and that the company made a valuable purchase when it acquired Equifax credit services affiliate.
Greenlight Capital exited its long position in Humana Inc. (NYSE:HUM), WellPoint, Inc. (NYSE:WLP), Dia (MCE:DIA) and Huntington Ingalls Industries Inc (NYSE:HII) and shorts in Inditex SA (MCE:ITX) and Pitney Bowes Inc. (NYSE:PBI).