David Einhorn signals caution as his hedge fund Greenlight prioritizes capital protection
Greenlight Capital President David Einhorn speaks at the 14th CNBC Delivering Alpha Investor Summit on November 13, 2024 in New York City.
Adam Jeffrey | CNBC
Hedge fund manager David Einhorn said he was focusing on capital preservation as markets rebounded on geopolitical optimism, warning that investors may be underestimating potential downside risks.
“It probably won’t surprise anyone that we’re putting capital protection back at the top of our priorities,” Einhorn said in his latest investor letter obtained by CNBC on Monday. he said. “With so little downside priced in, we are willing to take the risk of missing out on a potential recovery to position ourselves to play more offense if one of the downside scenarios occurs.”
U.S. stocks have staged a wild rebound, with the S&P 500 completely erasing losses since the start of the Iran war. The market is extending recent gains this week following the collapse of US-Iran talks over the weekend, as investors remain optimistic that a deal between the two countries is still possible.
S&P 500 year to date
Greenlight’s funds returned 6.5% in the first quarter, outpacing the S&P 500’s 4.4% decline. Still, Einhorn said the firm kept its gross and net exposures relatively low, reflecting caution regarding valuations and the broader macro framework.
“Even the most cautious invest with a Sammy Hagar-inspired mindset: one foot on the brake, one foot on the gas,” he said in the letter. “Nobody wants to miss the V, or even the checkmark-shaped recovery.”
When the conflict began, Greenlight was already operating with relatively low visibility and strained valuations. Einhorn said Greenlight made several adjustments, trading around index hedges and adding a long position to October oil futures. This bet has increased only modestly, as markets largely expect any supply disruption to be temporary.
Performance in the quarter was driven by earnings gold, Acadia Health, DHT Holdings And Basic Natural Resourcesaccording to the letter. Greenlight also initiated a mid-cap position. Versant Media Group and smaller bets crocodiles And SLM Company.
Disclosure: Versant Media is the parent company of CNBC.
