Greenlight Capital suffered another setback in November thanks to its overall skepticism of the stock market’s elevated valuations. The value-driven long-short fund headed by David Einhorn lost 1.8 percent last month and is up just 9 percent heading into the final month of the year.
Last month’s woes were not surprising as Greenlight has positioned itself conservatively all year. And in November, the markets enjoyed strong performance as the S&P 500 surged 5.7 percent and the Nasdaq Composite jumped by 6.2 percent.
The fund was up 9 percent through the first nine months of 2024, and the S&P 500 rose more than 20 percent. In its third-quarter letter, Greenlight put a somewhat positive spin on its underperformance: “Notably, all of our return this year has been alpha,” it told clients, acknowledging that the underperformance “doesn’t feel great on a beta-adjusted basis.” But it added, “We believe we are doing fine. If you happen to be invested in our gold share class, it’s better than fine.”
It is not known how the gold shares have performed this year. Over the first 11 months of the year, the spot price for gold is up about 26 percent, according to Goldprice.org. However, gold was down about 3.7 percent over the past 30 days, according to the website.
It is not known how Greenlight’s short and macro books fared last month, although the latter was clearly hurt by gold’s decline. But the two strategies must have suffered some big losses given that most of the firm’s largest longs enjoyed strong performances last month. It didn’t help that Greenlight was just 33 percent net long at the end of September, according to its third-quarter client letter. The only clunker last month among the largest long positions was Belgian chemicals company Solvay, which was down more than 14 percent.
Otherwise, all of the major longs made money, several posting huge gains for the month. For example, IT infrastructure services provider Kyndryl Holdings surged more than 50 percent after reporting much better fiscal second-quarter results than Wall Street was looking for, as well as a stock buyback. Mobile communications company Liberty Global was up more than 40 percent after completing a spin-off of its Swiss business, Sunrise, into a separate publicly traded company. The stock became Greenlight’s seventh-largest U.S.-listed long in the third quarter when the firm more than doubled its stake.
Greenlight initiated its position in the first quarter with a small position, according to its first-quarter client letter. At the time, it said the stock was trading at more than a 40 percent discount to its fair-value estimate and anticipated the company focusing on closing the gap — the first step being the spin-off of the Swiss business later in the year. “We estimate that the Swiss business, when separately listed, could account for more than half of Liberty Global’s total current market capitalization and could leave its remaining businesses trading collectively at a more than 60 percent discount to fair value,” Greenlight told clients at the time.
Five other top-ten U.S.-listed stocks were also up by double digits last month.
No. 2 long CONSOL Energy, a coal producer, gained nearly 18 percent, with most of the increase taking place after the election, when coal-friendly Donald Trump was elected president. Alight, which provides health benefit and payroll solutions, climbed more than 15 percent. Pharmaceuticals and health care corporation Viatris rose nearly 14 percent. CNH Industrial, which designs, produces, and sells agricultural and construction equipment, was up almost 12 percent. Greenlight initiated its position in the third quarter, and the stock is now the firm’s tenth-largest U.S.-listed long. Annuities seller Brighthouse Financial, the firm’s third-largest long, gained more than 10 percent last month.