David Einhorn profits from value-oriented investing in 2019. David Einhorn, the founder and President of Greenlight Capital Hedge fund, a long-short value-oriented hedge fund, managed to grind out 13.8% for 2019.
That is not exactly stellar performance, bearing in mind that the S&P 500 Index gained 28.88% returns last year. Nevertheless, David Einhorn’s Greenlight Capital fund has emerged from the cold winter days of redemption requests. In other words, investors running for the exit.
“David Einhorn, the founder and President of Greenlight Capital Hedge fund, a long-short value-oriented hedge fund, managed to grind out 13.8% for 2019”
Back in June 2018, David Einhorn’s Greenlight tumbled 7.7%, bringing the YTD loss to -18.7% after an 11.3% drop in 2017.
So in what appeared to be a resignation statement David Einhorn wrote,
“Every month this year we have said it couldn’t possibly get any worse for David Einhorn’s Greenlight, and the very next month we are proven wrong”.
Fund investor Morten Kielland, chairman, Key Family Partners SARL summed up the mood when he said, “My patience is wearing thin”.
David Einhorn profits from value-oriented investing strategy has finally broken two consecutive years of double-digit losses
David Einhorn’s value investment strategy involves taking long-short positions in stocks that are either oversold or overbought. So a value investing strategy profits from either Irrational exuberance when stocks are overbought due to excessive greed.
“My patience is wearing thin”
MORTEN KIELLAND (Greenlight fund investor)
Conversely, an oversold situation can also arise when investors overreact to bad news. In the latter case, David Einhorn profits from a value-oriented investing strategy would trigger a buy trade.
David Einhorn profits from a value-oriented investing strategy entailed long positions in a broad spectrum of oversold sector stocks
In the second half of 2019, David Einhorn’s Greenlight Capital was busy scooping up oversold stocks in airplane lessors and biotech companies researching to extend the human lifespan.
“We think the market has this wrong” – David Einhorn (on GATX Corp)
It was healthcare bullish bets that denominated David Einhorn profits from a value-oriented investing strategy
David Einhorn’s Greenlight Capital portfolio consisted also of short positions in rail car leasing company GATX Corp, which he said has higher maintenance costs and less visibility into future revenues but trades at higher multiples than AerCap. “We think the market has this wrong” said David Einhorn.
So David Einhorn profits from value oriented investing strategy, which has a contrarian element to it
A contrarian believes that crowd behavior among investors can lead to exploitable mispricings in the stock market.
The contrarian investor aims to make profits by selling and buying, contrary to market sentiment.
But a reversal of Fed policy from tightening to easing, which entailed three rate cuts and QE4 could best explain why David Einhorn profits from a value-oriented investing strategy. The Fed actively buying assets has created a one-way street bull market for stocks and bonds. In a QE to infinity environment, the high risk doesn’t compute, bearing in mind that the central bank has got investors’ back covered with endless liquidity. So QE infinity has canceled risk in the market and that has caused capital to rotate into cyclical and growth stocks.
Could David Einhorn profits from value-oriented investing strategy continue to be a profitable play in 2020?