David Einhorn's performance woes keep getting worse.
One month after the Greenlight founder sent a letter to clients disclosing that the fund had declined 1.6% in Q4 (bringing its total 2017 return to just 1.6%, below the average hedge fund's 6.5% return and the S&P's 22%) saying "this must be frustrating to you", he proceeded to have an abysmal January, in which his main hedge fund lost another 6.6%, its worst monthly loss since 2008.
At the time, the firm attributed most of its poor performance to losses in the last week of the month, when the market melted up, led by the stocks that comprise Einhorn's short basked: "Our long portfolio only achieved about half the S&P 500 return, while our short portfolio went up more than twice the index," Greenlight wrote, adding that many shorts rose 15 percent or more. "We believe the valuation spread between our longs and shorts is as wide as we can remember."
While all of Greenlight’s five top disclosed long holdings - AerCap Holdings, Bayer, Brighthouse Financial, General Motors and gold - made money in January, they were more than offset by declines in the short portfolio, according to the note. Netflix, a member of Greenlight’s “bubble basket,” surged more than 40% in January, while shares of Amazon.com and Tesla also soared.
Well, fast forward one month when Einhorn's recurring message to his investors was once again quite applicable.
During a conference discussing results for the Cayman-based Greenlight Capital Re, Einhorn had more "frustrating" news to investors: "While we’ve never underperformed like this, our prior worst underperformance compared to the S&P came in March of 2000, which was a similar environment."
Repeating the mantra from his recent letters, Einhorn expressed hope that value stocks will once again be bought... soon... maybe: “While the environment has remained difficult with growth stocks accelerating their outperformance against value stocks this year including February, we think a reversion may finally be coming soon."
Now all that Greenlight needs for this prediction to come true is a market crash .
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And while Einhorn clearly needs some luck from a harsh market which keeps rewarding money-losing tech stocks while punishing undervalued cash cows, it could have been worse: as we showed this morning, nothing compares to the bloodbath experienced this month by the systematic, CTA, trend-following quant community which got smoked after the VIXplosion in early February, as shown below.