David Einhorn talks about Greenlight Capital Re, Ltd. (NASDAQ:GLRE)’s investment portfolio and the first quarter financial results on the conference call on May 6th 2014. Greenlight Capital’s gains were led by Micron and Marvel as noted in David Einhorn’s Q1 letter. Also see: Einhorn Shorts AthenaHealth; A Look At The ‘Infamous’ MS Report. Below are brief remarks David Einhorn made on the call, which mostly focuses on what he describes as “”The Bubble Basket.”
David Einhorn – Greenlight Capital Re, Ltd. – Chairman
Thanks, Bart, and good morning, everyone. The Greenlight Capital Re, Ltd. (NASDAQ:GLRE) investment portfolio lost 7/10 of 1% in the first quarter. Our long portfolio was modestly profitable, led by gains in semiconductor companies Micron Technology, Inc. (NASDAQ:MU) and Marvell Technology Group Ltd. (NASDAQ:MRVL). Our short and macro investments cost us a bit more than we made on our longs. During the quarter, the average net exposure to the portfolio was about 50%, a neutral stance in a mostly directionless market.
The portfolio performed better in April, with a gain of 4.2%, led by Apple Inc. (NASDAQ:AAPL). This was an above-average amount of activity in our portfolio during the quarter. We exited a number of longs and shorts, and also found several new investments.
We added two new sizable long positions in the largest Japanese regional bank, Resona Holdings Inc (TYO:8308) (OTCMKTS:RSNHF), and solar company, Sunedison Inc (NYSE:SUNE). We bought Resona at eight times earnings and 80% of book value. The company earns an attractive ROE and is in the process of buying back large amount of stock from the Japanese government, which should prove accretive to earnings and book value. SunEdison has transitioned away from the less profitable business of making solar wafers to the more profitable business of developing solar projects, which it plans to keep. We believe that, when the market digests this change in strategy, the shares will re-rate to a higher valuation.
I’d like to clarify Greenlight Capital Re, Ltd. (NASDAQ:GLRE)’s remarks about a new technology bubble. In general, we are bullish on technology and technology stocks. Our largest positions include Apple Inc. (NASDAQ:AAPL), Micron Technology, Inc. (NASDAQ:MU), and Marvell Technology Group Ltd. (NASDAQ:MRVL), which we believe are quite inexpensive. However, we have identified a number of momentum technology stocks that have reached prices beyond any normal sense of valuation. We believe that they are in a bubble, and we have shorted a good number of them in what we call “the bubble basket.”
The reinsurance market continues to be very soft, and the team remains disciplined in trying to find good risk-adjusted opportunities. Despite the environment, the dual-engine strategy is working well, and several new entrants are emulating our business model. I look forward to seeing you at our Investor Day on May 20.