David Einhorn Dodges Big Oil Drop; Still Short Yen, RMB, French SovereignsVW Staff
David Einhorn's Greenlight Capital had an okay year as long tech positions helped shield against short positions which went sour. Much of this has been discussed in Greenlight's Q4 letter as ValueWalk previously reported, but David Einhorn filled in some details this morning on his reinsurer's conference call. Below are the remarks, followed by the audio.
David Einhorn – Chariman
The Greenlight Reinvestment portfolio returned 5.3% in the fourth quarter, bringing the 2014 full year return to 8.7%. During the quarter, the portfolio profit from long, short and macro positions, leading there way were Apple, our short positions in U.S. deal in an undisclosed industrial company and the Japanese yen. Our long position in Civeo was the only significant looser in the quarter as the real estate company proved to be more sensitive to plummeting oil prices than we expected. For the full year Apple which was 41% and micron which was 61% were the significant winners in our long portfolio which return 71.8% for the year. The short portfolio went up less than the market but lost 4.2% for the year.
In the fourth quarter we exited our energy positions in [Anadarko BP], Mcdermott and National Oilwell Varco. We hedged our underlying exposure to oil mid-year by shorting crude oil futures. This protected us from the sharp falloff in oil prices. Our current exposure to energy primarily consists of CONSOL Energy and SunEdison, neither of which is in the oil business. We ended the year conservatively position with 39% net exposure which is 15% less net long than a year ago. The positives we see in 2015 include falling unemployment, lower oil and other commodity prices that should boost consumer spending in the short term. And the first quarter will be an easy comparison for corporate earnings given last year’s first quarter was negatively affected by harsh weather. The negatives we see include stretched valuations and earnings headwinds later this year including the strong dollar which reduces the translated earnings of foreign subsidiaries.
From a macro perspective we are worried that emergency policies are now falling. We continue to maintain our macro overlay with positions in gold short Japanese yen and Chinese RMB and short French sovereign debt. 2014 has been a year of significant infrastructure build-out at Greenlight Re. Throughout the year we have organized a middle office team to help enhance our systems and data tracking. We’ve added three senior members to staff who are now fully integrated and have further enhanced our underwriting actuarial capabilities. I just returned from our board meeting and reviewed our business activity for the beginning of 2015 and our pipeline appeared strong. We’re finding creative ways to right new business despite the continued soft reinsurance environment; I’m pleased with the team’s progress.