InsiderMonkey (CC BY-ND 2.0) David Einhorn

Greenlight Cuts Long Exposure Amid Euphoria, Still Likes Yen Short

We noted last evening, that David Einhorn was bearish on various currencies, including the Yen, Yuan, AUD. Today, on the conference call for Greenlight Capital Re, Ltd. (NASDAQ:GLRE) Einhorn confirmed those views. He noted that he still had a big Yen short and was pulling back on long positions as the market continued climbing. Below is a transcript on Einhorn from the conference call.

See Greenlight Q3 letter to shareholders here.

David Einhorn On Greenlight Capital RE earnings. Thanks Bart and good morning and Happy Halloween everyone.

Greenlight Cuts Long Exposure Amid Euphoria, Still Likes Yen Short

The Greenlight Capital Re, Ltd. (NASDAQ:GLRE) investment portfolio returned 4% in the third quarter bringing the 2013 net return to 12.2%. In the third quarter, the Greenlight Re investment portfolio captured 77% of the markets gain with about 35% average net exposure.

As the markets continued its relentless climb, we became more conversely positioned and we ended the quarter 35% net long, down from 42% at the end of the second quarter. Our long portfolio more than doubled the S&P 500 (INDEXSP:.INX) written especially every long position was profitable in the quarter. Apple Inc. (NASDAQ:AAPL) was our biggest winner as its earnings guidance stabilized and the new iPhones released and had initial record sales.

We believe that Apple Inc. (NASDAQ:AAPL)’s brand product line, customer ecosystem, balance sheet strength and capital allocation strategy warrant a higher multiple than the current single-digit multiple net of the substantial cash on its balance sheet.

During the quarter Verizon agreed to acquire Vodafone Group Plc (ADR) (NASDAQ:VOD) (LON:VOD)’s 45% stake in Verizon Communications Inc. (NYSE:VZ) for $130 billion, a price that is a premium to the value we expected from a possible sale. We continued to have exposure to Vodafone’s core business which currently trades below its less exciting peers and it’s also an attractive acquisition target on its own.

We also had contributions from two new positions we accumulated during the quarter, one is the U.S. based technology company and the other is Osram Light, a lighting solutions company based in Germany that spun-off from Siemens during the quarter.

Our short portfolio detracted from performance in the third quarter, the losses in the short portfolio were broad based and we continued to be short most of the companies that contributed the loss. These include a variety of companies which tend to have conventional valuations rather than speculative story talks that have caused excessive pain for other short sellers.

We continued to be short Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) which trades at a premium to the market multiple on next year’s earnings estimates that we believe the company will not achieve. The company faces significant competitive challenges that we believe will impact its margins over the next 12 months.

Our macro positions were slightly negative in the third quarter and then became less volatile which caused losses on our puts. The weakened yen remains one of our most profitable positions so far this year. We continued to have substantial exposure to further weakening, our macro positions are slightly positive for this year so far.

We are pleased with the results of our underwriting operations so far this year as well. We continued to service our existing relationships while we look for other areas for our client-centric approach might yield future business opportunities. The team is working well together and has found a few new relationships despite a soft market.

Via SeekingAlpha


Saved Articles

The Life and Career of Charlie Munger

Charlie is more than just Warren Buffett’s friend and Berkshire Hathaway’s Vice Chairman – Buffett has actually credited him with redefining how he looks at investing. Now you can learn from Charlie firsthand via this incredible ebook and over a dozen other famous investor studies by signing up below:

  • Learn from the best and forever change your investing perspective
  • One incredible tidbit of knowledge after another in the page-turning masterpiece of a book
  • Discover the secrets to Charlie’s success and how to apply it to your investing
Never Miss A Story!
Subscribe to ValueWalk Newsletter. We respect your privacy.

Congrats! Are you a smart person?

We have an exclusive targeted & limited time offer for being a sophisticated and loyal reader.

ValueWalkPremium is a website and newsletter on the latest industry news much of which is not in the public domain and obtained via our sources.

We also have 10 years of resources on how to use this information to better your investment process.

Sign up for  today and get our exclusive content for 40% off. This is our second biggest discount ever!!

Use coupon code VIP20 or click on the button below

Limited time offer only ENDS 4/30/2020 or after the next 40 subscribers take advantage whichever comes first – please do not share this discount with others