Morning Brief: Greenlight’s Einhorn Reaffirms Faith in Value Investing

October 26, 2017   Stephen Taub

The fund manager took to CNBC to defend the strategy after pondering its future viability in his firm’s third-quarter letter, released the previous day.

Greenlight Capital’s David Einhorn reaffirmed his faith in value investing. In an interview on CNBC, the long-short manager best known for his activism and high-profile shorts of so-called bubble stocks said the poor performance of value stocks is a "temporary phenomenon." He said the last time this happened was around 1999, during the dot-com boom, when so-called experts talked about a new paradigm for investing, which favored momentum investors.

"That didn’t end very well" for these investors chasing fast growth based on a variety of metrics. Rather, Einhorn told CNBC, value investing is "due at some point for a significant recovery. When it reverts, it tends to revert pretty sharply. And I think it will do so."

The question about the future viability of value investing was raised by Einhorn himself in his third-quarter letter, which made the rounds on Tuesday. He seemed confused and frustrated over whether value investing was dead or just out of favor, stating, "the market remains very challenging for value investing strategies" in general, stressing that growth stocks continue to outperform. "The persistence of this dynamic leads to questions regarding whether value investing is a viable strategy," Greenlight added. It did note that historically when out-of-favor strategies are questioned, it is about the time they come back in vogue. But the letter wonders whether this will ever happen.

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Highbridge Capital Management disclosed it owns 8.25 million shares of Mosaic Acquisition Corp., or 8.26 percent of the blank-check company. The multistrategy firm is one of a number of hedge funds that often invests in these kinds of companies, which are designed to do some sort of deal in the future.

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Shares of LINE Corporation surged 12.7 percent, to close at $41.45 percent, making it the largest percentage gainer on Wednesday. Brett Barakett’s Tremblant Capital is the largest shareholder, with more than 22 percent of the shares outstanding of the company, which offers a mobile messaging service. The stock is also the hedge fund firm’s third-largest long position.


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