David Einhorn: value is struggling

Hedge fund manager David Einhorn says his favoured strategy of value investing – buying out-of-favour companies – has struggled as growth company stocks have shot up.

908_MW_P14_Guru
David Einhorn, founder and president of Greenlight Capital

Star hedge-fund manager David Einhorn hasn't performed well lately and admits it's been "far worse" than he could have imagined. In fact, his hedge-fund firm, Greenlight Capital, lost 5.4% in the second quarter, which has resulted in a whopping year-to-date loss of 18.3%, according to CNBC. The S&P 500, by comparison, gained 2.6% in the year to 30 June.

"Over the past three years, our results have been far worse than we could have imagined, and it's been a bull market to boot," Einhorn wrote in a letter to investors in the end of July. He pointed to "obvious mistakes" made during that time "the worst of which was not assessing that SunEdison [a solar company] was a fraud in 2015". Others include ignoring one of his investors who said that Amazon would become the most valuable company in the world. "We didn't get it then, and truthfully, we don't really get it now," Einhorn admitted.

Some claim that "getting older, changing lifestyles and an unwillingness to adapt to new market environments" are the reason behind his lousy performance. Einhorn vehemently denies this. Instead, he says, his favoured strategy of value investing buying out-of-favour companies has struggled as growth company stocks have shot up. This will change at some point, but we "can't say when", noted Einhorn. "Right now the market is telling us we are wrong, wrong, wrong and yet, looking forward we think this portfolio makes a lot of sense."

Recommended

Cash rich and bored? Be careful what you do with your money
Investment strategy

Cash rich and bored? Be careful what you do with your money

As the pandemic has left many people with more time on their hands but little opportunity to spend, they have been speculating in the markets. But don…
19 Oct 2020
Jonathan Ruffer: tech stocks have become “long-duration assets”
Tech stocks

Jonathan Ruffer: tech stocks have become “long-duration assets”

As with bonds, tech stocks are now held not because of that they are, but because of what investors fear if they don't hold them, says Jonathan Ruffer…
16 Oct 2020
Investors should give European stockmarkets a second look
European stockmarkets

Investors should give European stockmarkets a second look

Investors tend to think that European stockmarkets are full of stale “old economy” firms while the US is full of fast-growing tech stocks. But Europea…
16 Oct 2020
Lessons for investors from Big Tech's previous golden era
Tech stocks

Lessons for investors from Big Tech's previous golden era

The forerunners of today's tech stock titans dominated the 1960s and 1970s. Former Xerox senior manager Dr Mike Tubbs was there and explains what inve…
16 Oct 2020

Most Popular

The Bank of England should create a "Bitpound" digital currency and take the world by storm
Bitcoin

The Bank of England should create a "Bitpound" digital currency and take the world by storm

The Bank of England could win the race to create a respectable digital currency if it moves quickly, says Matthew Lynn.
18 Oct 2020
What would negative interest rates mean for your money?
UK Economy

What would negative interest rates mean for your money?

There has been much talk of the Bank of England introducing negative interest rates. John Stepek explains why they might do that, and what it would me…
15 Oct 2020
Negative interest rates and the end of free bank accounts
Bank accounts

Negative interest rates and the end of free bank accounts

Negative interest rates are likely to mean the introduction of fees for current accounts and other banking products. But that might make the UK bankin…
19 Oct 2020