David Einhorn, the president and founder of Greenlight Capital, recently issued his latest quarterly letter to investors. The hedge fund superstar had a disappointing fourth quarter and managed to eloquently critique his own performance like none other. However, he still has significant long positions that are attracting attention.
The Greenlight Capital funds posted a 4.9 percent decline in the fourth quarter, net of fees and expenses. The final quarter of 2012 reduced Einhorn’s year from “good to pedestrian,” but he still managed a net return of 7.9 percent. Since inception in 1996, Greenlight Capital has returned a net 19.4 percent on an annualized basis. Last year was not a “catastrophe” for the funds, but it fell “short of our goals,” as the S&P 500 logged a double digit gain and clearly separated the winners from the losers.
Einhorn sums up the fourth quarter by explaining, “Our coffee was too hot, our apple was bruised, and our iron supplements didn’t go down smoothly. We got to marvel at a jury’s decision to endow a university with a billion dollar verdict, and tried not to get too moody when several of our shorts melted up.” Greenlight’s average short increased about 10 percent, as Green Mountain Coffee Roasters (NASDAQ:GMCR) led the way with a 74 percent advance that “wiped out” Einhorn’s 2012 profit in the position. Some people assumed iron supplements was a hint at a Herbalife (NYSE:HLF) short position, but Einhorn has not confirmed this and even notes a new bearish thesis on iron ore later in the letter.
At the end of the fourth quarter, Greenlight Capital funds had an average exposure of 114 percent long and 70 percent short. The positive full year performance was powered by long positions.
Here’s a look at the five biggest longs…