David Einhorn, President of Greenlight Capital, speaks at the 14th Annual CNBC Delivering Alpha Investor Summit in New York City on November 13, 2024.
Adam Jeffrey | CNBC
Hedge fund manager David Einhorn said he was focused on protecting capital as markets rallied on geopolitical optimism and warned investors may be underestimating potential downside risks.
“It probably won’t surprise anyone that we are once again putting capital preservation at the top of our priorities,” Einhorn said in his latest letter to investors, dated Monday and obtained by CNBC. “There is very little downside priced in, so if any of the downside scenarios materialize, we are willing to risk missing out on a potential recovery to remain more aggressive.”
U.S. stocks rallied sharply, with the S&P 500 completely erasing losses suffered since the start of the Iran war. Investors remain optimistic that a deal between the two countries is still possible after talks between the US and Iran broke down over the weekend, with markets building on recent gains this week.
S&P 500 year-to-date trends
Greenlight’s fund returned 6.5% in the first quarter, outpacing the S&P 500’s 4.4% decline. Still, Einhorn said the company has kept its gross and net exposures relatively low, reflecting caution about valuations and the broader macro backdrop.
“Even the most cautious people invest with a mindset inspired by Sammy Hagar: one foot on the brake and one foot on the gas,” he said in the letter. “We don’t want to miss out on a V-shaped recovery or even a checkmark-shaped recovery.”
When the dispute began, Greenlight was already operating at a relatively low exposure because it deemed the valuation to be excessive. Einhorn said Greenlight has made few adjustments, trading primarily in index hedges and adding long positions in October crude oil futures. Bets have only risen slightly as the market largely expects the supply disruption to be temporary.
This quarter’s results are gold, Acadia Healthcare, DHT Holdings and core natural resourcesaccording to the letter. Greenlight also initiated a medium-sized position Versant Media Group and smaller stakes crocs and SLM Co., Ltd..
Disclosure: Versant Media is the parent company of CNBC.
