After market’s rapid climb, Einhorn pares bet on rally

Hedge-fund manager David Einhorn is taking a more conservative approach to his investment portfolio even as wagers that stocks would fall caused his results to trail the Standard & Poor’s 500 Index.
Long positions, which gain on rising asset prices, exceeded short bets by 35 percentage points as of Sept. 30 at Greenlight Capital Re Ltd., the Cayman Islands-based reinsurer where Mr. Einhorn oversees investments and serves as chairman. That’s down from about 42 percentage points three months earlier, the money manager said today on a conference call.
“As the market continued its relentless climb, we’ve become more conservatively positioned,” he said.
Mr. Einhorn, who gained fame for betting on a decline in Lehman Brothers Holdings Inc. stock before it collapsed in 2008, said most of the portfolio gain in the quarter was from long holdings in companies including Apple Inc. He said he was sticking with his short positions, or wagers that a stock will decline, including one on Green Mountain Coffee Roasters Inc.
“The losses in the short book were broad-based, and we continue to be short most of the companies that contributed to the loss,” he said. “These include a variety of companies which tend to have conventional valuations, rather than speculative story stocks that have caused excessive pain for other short sellers.”
JELLY DONUTS
Greenlight Re’s investment portfolio returned 4% in the third quarter and 12% in the first nine months of the year, the company said Wednesday in a filing. That compares with 5.2% and 20% for the S&P 500, including dividends. The reinsurer’s portfolio was valued at $1.15 billion as of Sept. 30.
Mr. Einhorn has sounded alarms about the climb in asset prices for months. Last year he compared excessive stimulus by central bankers with eating too many jelly donuts, a habit that can be a threat to long-term health, according to an article that quoted him in Grant’s Interest Rate Observer.
BlackRock Inc. Chief Executive Officer Laurence D. Fink echoed some of that concern during a panel discussion in Chicago this week. The head of the world’s largest money manager said that Federal Reserve efforts are contributing to “bubble-like markets.” He called on policy makers to begin to taper $85 billion a month in bond purchases that have caused the central bank’s balance sheet to swell to more than $3.8 trillion.
Mr. Einhorn said he accumulated holdings in two new stocks in the third quarter. One was a U.S. technology company that he didn’t identify on the call. The other is Osram Licht AG, a German lighting company that spun off from Siemens AG. He didn’t disclose the size of either investment.
Osram has cut jobs and said it plans to shut or sell plants as it targets $1.36 billion in savings by 2015. The Munich-based company has advanced about 60% since it began trading on July 8.
He also reiterated his support for Newbury, England-based Vodafone Group Plc after saying earlier this month that it could be an attractive takeover target for AT&T Inc. The British company agreed to sell its 45% stake in Verizon Wireless to Verizon Communications Inc. for $130 billion in September. Mr. Einhorn said that price was more than he expected.
“We continue to have exposure to Vodafone’s core business, which currently trades below its less-exciting peers,” he said. The remaining business will be “an attractive acquisition target on its own.”
(Bloomberg News)