The world’s greatest investors: David Einhorn
Greenlight Capital, run by David Einhorn, adopts a long-short strategy, taking long and short positions.
David Einhorn, born in New Jersey in 1968 to an investment banker father, graduated from Cornell in 1991. An internship with US regulator the Securities and Exchange Commission, sparked his interest in investing, and he took a job at investment bank Donaldson, Lufkin & Jenrette before moving to hedge fund Siegler, Collery & Co. Einhorn credits Siegler's focus on value investing as an influence. In 1996, he set up Greenlight Capital, which he still runs.
What is his strategy?
Greenlight Capital adopts a long-short strategy, taking long and short positions. The aim is to make money on both sides, but has the added benefit of hedging swings in the market. Einhorn is primarily a value investor, buying shares in firms he thinks are undervalued and shorting those that are overpriced and suffering from deteriorating performance. Einhorn has said value investing is difficult in the current market environment, as shown by the continuing strong performance of companies such as Amazon and Tesla.
Did this work?
Between May 1996 and January 2016, Greenlight Capital returned a total of 1,902% or 16.5% per year. In contrast, the S&P 500 returned only 339%, equivalent to 7.8%. Greenlight Capital's assets under management have grown more than 10,000 times from $900,000 to $9.3bn. Einhorn's personal fortune is estimated by Forbes to be $1.36bn.
What are his biggest wins?
In July 2007, Einhorn started shorting Lehman Brothers. He announced this position after the collapse of Bear Stearns in early 2008, and was proved correct when Lehman went bankrupt in September 2008. One of his most notable long positions is in Apple, which he bought in August 2010 for around $34. It has since gone up five times over the past seven and a half years.
What can investors learn?
Critical thinking, the ability to be different from the crowd and also correct, is the key to success. But don't be too inflexible. Thinking like a poker player can help Einhorn finished 18th in the World Series of Poker in 2006.