We recently brought you David Einhorn’s full first quarter letter. Einhorn discusses his Yen short, Apple investment, gold etc. Einhorn is chairman of Greenlight RE which just reported earnings recently. David Einhorn discussed some of the topics in the letter on the call. Below is a transcript of Einhorn’s words and a link to the audio file of the call.
David Einhorn Conference Call text and audio below
David Einhorn – Chairman Conference Call
Thanks, Bart, and good morning everyone. The Greenlight Re investment portfolio managed by DME Advisors, returned 5.8% in the first quarter, led by the gains in Marvel and Vodafone, and continued weakening again.
GrizzlyRock Value Partners was up 16.6% for the first quarter, compared to the S&P 500's 5.77% gain and the Russell 2000's 12.44% return. GrizzlyRock's long return was 22.3% gross, while its short return was -2.9% gross. Compared to the Russell 2000, the fund's long portfolio delivered alpha of 10.8%, while its short portfolio delivered alpha Read More
Marvel reversed much of its 2012 decline in the first quarter, as investors shifted their focus to Marvel’s robust product pipeline, and aggressive stock buyback plan. Vodafone shares appreciated as it is now clear that Horizon is interested in buying Vodafone’s 45% stake in Horizon Wireless.
Our biggest loss in the first quarter came from Apple, which declined about 17%. The biggest problems for Apple investment are disappointing earnings and a diminished forecast. Our thesis remains that Apple has a terrific operating platform and is loyalty in growing customer base will make repeated purchases of a growing portfolio of Apple products.
Apple took a major step forward by issuing debt and announcing it will return $100 billion to shareholders over the next three years. This is a vastly more shareholder firmly capital allocation policy, then where Apple stood a few months ago. We’ve added to our Apple position. Now, we just wait for the release of Apple’s next blockbuster product.
Our short portfolio mostly detracted from our performance, as our shorts rose less than half as much as the market. About a quarter of the first quarter results came from our macro portfolio lead by gains in the net long.
Through April, our net long position has reversed all of the losses from 2010 and 2011, a portfolio’s biggest losing position in each of those years. These gains have more than offset the gold price decline in the first quarter and April. We were somewhat surprised by the swift decline in the price of gold in April. With Governor Kuruda’s appointment, the Bank of Japan officially joined the global monetary printing race. It seems that every time a central banker takes a more aggressive action without short-term negative consequences, it reinforces the behavior of other central bankers. We believe that recent events, including the regime change, at the Bank of Japan to support our long-term pieces of both a weaker yen and stronger gold. We ended the quarter 38% net long, which was where our net exposure stood at the beginning of the year. During the quarter, we exited a few of our long positions and found a couple new longs and shorts.
Corporate earnings for the March quarter have been a NYMEX on a year-on-year growth basis. While the S&P 500 has risen about 14% over the past year, and stands at an all time high, as investors are drawn to equity, given the lack of other investment alternatives.
The markets move higher over the past year has been led by multiple expansion, as investors have convinced themselves that central banks are in control and their actions support equity prices.
On the business side, although the underwriting results over the last year have been disappointing, the team is managing well through certain problematic legacy contracts, and are focused on the future. Our team is now almost pretty strong. Suzanne Fetter joined us this quarter as Vice President of Claims. She will expand our experience in the claims area and is initially focused on overseeing the claims handling of the commercial auto and general liability contracts.
Our Irish gained traction in the European marketplace. We’re optimistic about 2013, although cognizant that we must proceed with caution in the current soft environment.
Greenlight Re Conference call- David Einhorn comes in a few minutes into the call
Further Reading- David Einhorn Drops Hint He is Shorting Major Canadian Retailer