Greenlight Capital began the fourth quarter with a positive start, posting a 1.9% gain in October, while the S&P 500 by comparison fell by 0.9%, and the Nasdaq Composite gained 1%, according to a report by Institutional Investor.
Despite the uptick, the hedge fund, led by David Einhorn, remains behind broader market returns, up 11% year-to-date versus a 20% increase for both benchmarks.
In its recent investor letters, Greenlight has highlighted a cautious approach, reporting a “neutral net long exposure” of around 40% in its Q2 letter, reiterating that conservative stance in its Q3 letter noting “low exposure to equity beta” and cautioning that, although it expects to underperform in a rising market, it aims to avoid losses if the market dips.
Einhorn believes the market may be nearing the end of a bull run, adding: “This is, by many measures, the most expensive stock market we’ve seen since Greenlight was founded.”
The performance of Greenlight’s short and macro portfolios in October is unclear, but three of the firm’s five largest long positions showed gains. However, Green Brick Partners, Greenlight’s largest long position, was also its biggest drag, dropping over 17% in October. The homebuilding company, which represents about 30% of Greenlight’s portfolio, remains up roughly 33% for the year. The letter praised Green Brick’s industry-leading gross margins and performance relative to peers.
Hewlett Packard, down 1% for the month, became Greenlight’s fourth-largest US position after the fund more than doubled its stake in Q2.
Other top holdings performed well in October, with Consol Energy, a coal producer and Greenlight’s second-largest long, gaining 6%, Brighthouse Financial, an annuities marketer, climbing more than 8%; and Belgian chemicals company Solvay seeing a 5.3% gain.
