Einhorn’s Greenlight Cranks Up Market Exposure, Posts 10 Percent Gain YTD

December 03, 2012   Stephen Taub

The widely followed manager is slowly but surely getting more bullish, dialing up his flagship fund’s net long position over the past few months.

Who’s afraid of the stock market? Not David Einhorn, the widely watched and frequently imitated hedge fund manager, who has dialed up his exposure to the equity markets over the past few months.

The position hasn’t hurt Einhorn’s flagship long-short equity fund at Greenlight Capital, which was essentially flat in November, losing a mere 0.5 percent for the month; it is still up 10 percent for the year.

While many managers have taken down their exposure to the markets, Einhorn is getting more bullish. As of the end of November, Greenlight’s investment portfolio was roughly 118 percent long and 72 percent short, compared with being 100 percent long and 73 percent short at the end of October and 96 percent long and 70 percent short at the end of September. This exposure analysis does not include gold, credit default swaps, sovereign debt, cash, foreign currency positions, interest rate derivatives and other macro positions.

While Greenlight’s performance is worse than the S&P 500 — which is up 12.6 percent for the year — and the tech-driven Nasdaq Composite, which has surged 15.5 percent in the first 11 months, it is still doing better than most of its peers. The average hedge fund gained 4.3 percent through October, according to industry tracker Hedge Fund Research.

At the end of November, Greenlight’s largest disclosed long positions were tech giant Apple, chemical company Arkema, health insurance provider Cigna, car maker General Motors and gold. Arkema, which was one of its largest positions earlier in the year, replaced Seagate Technology in this line-up, which had not changed during the previous two months.

Over the past few years, the 44 year-old Einhorn has emerged as one of the most emulated hedge fund managers of his generation, particularly after his early but ultimately prescient short position against Lehman Brothers, which went under in 2008. When Einhorn speaks at conferences or on TV, investors listen closely and act impulsively on what he says.

He has received much attention for two bearish bets detailed at the Value Investing Congress, an investing summit that typically takes place in New York in October. Since he laid out his reasons for shorting Green Mountain Coffee Roasters at the 2011 conference, the stock has sunk more than 55 percent. Since he made a bearish case against Chipotle Mexican Grill at this year’s presentation, shares of the Mexican take-out chain have fallen 12 percent.

Meanwhile, two stocks Einhorn touted as long positions at the conference this year have been profitable. GM is up 6 percent while Cigna is up 7 percent.

The early data come from an investment account of Greenlight Capital Re Ltd. — a Cayman Islands-based insurance company controlled by Einhorn — that is managed by a Greenlight Capital entity.

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