Greenlight Capital hedge fund manager and notorious value investor David Einhorn just released his annual letter to investors, which revealed a record quarter for Einhorn to close out a difficult 2020.
Finishing Strong: Greenlight took a massive hit from a large short position in Tesla Inc (NASDAQ: TSLA) in 2020, but Greenlight finished strong with a 25% gain in the fourth quarter. Despite the disastrous Tesla short position, Einhorn was able to salvage a 5.2% overall gain for the fund for the year.
The Greenlight letter disclosed several new long positions heading into 2021, including Fubotv Inc (NYSE: FUBO), Danimer Scientific Inc (NYSE: DNMR) and Neubase Therapeutics Inc (NYSE: NBSE), according to Bloomberg. All three stocks were trading higher by more than 10% on Thursday.
Einhorn said the Tesla short position was Greenlight’s biggest loser in 2020, although he reportedly adjusted the position prior to Tesla’s inclusion in the S&P 500.
Einhorn’s Recent Struggles: Greenlight has significantly underperformed the S&P 500 in recent years as growth stocks have soared and value stocks have lagged. Greenlight reported a 14% net gain in 2019 following a 38% net loss in 2018, its worst year since the fund’s inception in 1996.
Einhorn gained mainstream notoriety on Wall Street back in 2007 when he disclosed a short position in Lehman Brothers prior to the bank’s collapse in 2008. However, he had drawn a lot of criticism in recent years for his persistent short position in Tesla and his often heated public communications with Tesla CEO Elon Musk.
"TSLA cars are not a fad; if they were, TSLA would sell many more than it does. The fad is in owning TSLA stock," Einhorn said in the letter.
As of the end of the third quarter, Greenlight’s three largest long positions were Green Brick Partners Inc (NYSE: GRBK), Brighthouse Financial Inc (NASDAQ: BHF) and Atlas Air Worldwide Holdings, Inc. (NASDAQ: AAWW).
Benzinga’s Take: Economist John Maynard Keynes famously said “the market can stay irrational longer than you can stay solvent,” and Einhorn’s performance in recent years highlight just how much of a toll a single short position can take on an entire portfolio when the stock in question gets caught in a potential market bubble. Short positions can result in unlimited theoretical losses, whereas standard long positions are capped at just 100% downside.
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