David Einhorn: value is struggling

David Einhorn, founder and president of Greenlight Capital
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.”