Greenlight Capital Re, Ltd. (NASDAQ:GLRE) comments from Greenlight Capital audio and comments from David Einhorn below. Also see Einhorn Up 2.1% In October, While Loeb Down 1.3%
Q3 2014 Earnings Conference Call
November 4 2014 9:00 AM ET
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David Einhorn – Chairman
Greenlight Capital Q3 2014 Earnings Conference Call
David Einhorn founder and president of Greenlight Capital
Thanks, Bart. And good morning everyone. The Greenlight Re investment portfolio loss 3.7% in the third quarter which brings the 2014 net return to 3.2%. It was a frustrating quarter as a lack of winners combined with a normal amount of individual losers led the losses from our long, short and macro positions. Nothing terrible happened, but we just got ground down gradually. In such circumstances, it is not obvious what to do other than stay the course and be patient.
Apple, which still trades well below our market multiple was our only notable contributor for the quarter as it start price began to reflect the strength of its iOS platform and the enthusiasm for new phones and services. The gain in Apple Inc (NASDAQ:AAPL) was roughly offset by a loss in our long position in Civeo Corp (NYSE:CVEO), the accommodations business spun off from Oil States International, Inc. (NYSE:OIS). The stock sold off and management surprised the market with the substantial operating short fall and a decision to not move forward with the re-conversion. We disagree with the company’s actions and believe the company should be levered real estate entity that distributes most of its cash flows.
On the short side, United States Steel Corporation (NYSE:X) temporarily benefited from panic ordering due to a shortage of raw materials which led to a spike in hot rolled steel prices. Given the new record spread between domestic steel prices and foreign steel prices, we believe that imports will arrive shortly, steel prices will retrace and the US Steel’s great third quarter will likely be the best result it reports for a long time.
We also had loss in Mallinckrodt PLC (NYSE:MNK) whose shares advanced after the company completed its acquisition of Questcor Pharmaceuticals Inc (NASDAQ:QCOR). We believe the accretive acquisition proved too tempting for management despite the risk that comes along with it. We ended the quarter 40% net long which is our lowest net exposure so far this year at any month end. We were well positioned to be opportunistic in a dislocation in early October which was the first real dislocation we’ve seen in a long time. We added to our net long exposure during the correction, which unfortunately was brief. We returned 2.1% in October.
We just spent several days last week at our Board meeting, reviewing the business pipeline and our underwriting plan for 2015. Although the underwriting environment continues to be very competitive, I am pleased with the progress we are making. The addition of Cliff, Jim and Tim should enhance our market reach, and the recent business we have underwritten gives me optimism about upcoming year. The team is energized but cognizant that our main priority is to protect capital.