David Einhorn, President of Greenlight Capital, speaks at the 14th CNBC Delivering Alpha Investor Summit in New York City on November 13, 2024.
Adam Jeffery | CNBC
Hedge fund manager David Einhorn said he is focused on protecting capital as markets rally on geopolitical optimism, warning that investors may be underestimating potential downside risks.
“It probably won’t surprise anyone that we are putting capital preservation back at the top of our priorities,” Einhorn said in his latest investor letter dated Monday and obtained by CNBC. “With so little downside priced in, we are willing to risk missing out on a possible recovery in order to position ourselves for more offense should any of the downside scenarios materialize.”
US stocks rallied sharply, with the S&P 500 fully recouping losses suffered since the start of the Iran war. The market is building on recent gains this week, even after negotiations between the US and Iran collapsed over the weekend, as investors remained optimistic that a deal between the two countries was still possible.
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S&P 500 since the beginning of the year
Greenlight’s funds returned 6.5% in the first quarter, outpacing the S&P 500’s 4.4% decline. Still, Einhorn said the company kept gross and net exposure relatively low, reflecting caution over valuations and the broader macro backdrop.
“Even the most cautious invest with a Sammy Hagar-inspired mentality: one foot on the brake and one foot on the gas,” he said in the letter. “Nobody wants to miss out on the V-shaped or even the tick-shaped recovery.”
When the conflict began, Greenlight was already relatively uncommitted and referred to what it considered to be exaggerated valuations. Einhorn said Greenlight made few adjustments by trading index hedges and taking a long position in October oil futures. That bet has increased only slightly as markets largely expect the supply disruption to be temporary.
Performance in the quarter was driven by increases in Gold, Acadia Healthcare, DHT holdings And Basic natural resourcesthe letter says. Greenlight also initiated a medium-sized position in Versant Media Group and smaller investments Crocs And SLM Corp.
Disclosure: Versant Media is the parent company of CNBC.
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