David Einhorn’s own son summed up his year in 2015 with a simple sentence: “Dad, why don’t you just short your longs and long your shorts?”
Einhorn’s Greenlight Capital fell 3.8% in the fourth quarter and completed 2015 down by 20.2%. Einhorn’s only previous down year was in 2008 when his fund lost 23% of its value.
In a fourth quarter letter to investors, Einhorn explains all of the things that went wrong at his popular hedge fund in 2015.
- 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.
You know it was a bad year when your own child is mocking your funds decisions.
There are still a lot of questions to be asked and answered. In the meantime, a strong US dollar, sinking oil prices, and uncertainty in China’s markets, are all leading to a miserable start to 2016.