One of David Einhorn’s kids gave him some investment advice:
“Dad, why don’t you just short your longs and long your shorts?”
Einhorn’s Greenlight Capital fell 3.8% in the fourth quarter, ending 2015 down 20.2%. Einhorn’s only previous down year was in 2008, when his fund lost 23%.
Nothing seemed to go his way in 2015.
From Greenlight’s fourth-quarter letter to investors:
Let’s get some of the gory facts out of the way:
- We lost money every quarter.
- We had six positions that cost us more than 1%, but only one position that made more than 1%.
- We were short the top two performing stocks in the S&P 500 (Netflix (NFLX) and Amazon (AMZN)).
- We were long two of the 10 worst performing stocks in the S&P 500 (CONSOL Energy (CNX) and Micron Technology (MU)).
- We didn’t own any of the 50 best performing stocks in the S&P 500.
- We had four shorts taken over.
- We surrendered a lot on a few other shorts either by covering right before they fell, or declaring victory right before they fell much further.
- We failed to monetize nice gains in MU and SunEdison (SUNE) at what now look to be great prices.
There are lots of simple theories about what went wrong and what we can or should do about it. Everyone wants to help. Even one of David’s children suggested, “Dad, why don’t you just short your longs and long your shorts?” If only it were that easy….