Einhorn’s Greenlight Puts Bad Trade in the Rear View Mirror

David Einhorn, the head of hedge fund Greenlight Capital, weathered the criticism of market pundits and a nearly catastrophic trade in 2008 to emerge on sounder footing in 2009.

The hedge fund was among many institutional investors caught out in October when shares of German carmaker Volkswagen’s leapt 82% in a single session. Greenlight had been short the shares, but when rival carmaker Porsche said that it had taken control of 74% of Volkswagen’s voting shares, Volkswagon’s stock price spiked. A number of hedge funds got crushed on the trade, and, in a May 1st letter to investors, Einhorn said the bad trade cost more than 1% of Greenlight’s performance.

In the same May 1st letter, Einhorn said that Greenlight’s gross short exposure was 32% on March 6th, the day the market bottomed, the lowest level of gross short exposure for the firm since March 2003. As the market was nosediving, Greenlight completely covered its bank shorts and bought equities and corporate debt, Einhorn said. Einhorn was in the news earlier this year — and was villainized by some market pundits — for his vocal bearish stance on embattled investment bank Lehman Brothers (Other OTC: LEHMQ.PK).

Looking at Greenlight’s top-15, U.S.-listed, equity holdings from the end of Q1, one can see that the firm opened several new stakes during the quarter, including in audio products maker Harman International (HAR), integrated energy company Hess (HES), and pharmaceutical firms Wyeth (WYE) and Pfizer (PFE). Pfizer is in the process of acquiring Wyeth in one of the largest pharmaceutical deals ever.

Elsewhere, Einhorn was upping stakes in gold ETF SPDR Gold Trust (GLD); data storage company EMC (EMC); Aspen Insurance Holdings (AHL); Teradata (TDC), a maker of hardware and software that help companies analyze data on business trends; and EchoStar (Nasdaq: SATS), which sells set-top boxes and provides satellite television services.

Looking at tickerspy.com’s graph charting the performance of Greenlight’s end-of-Q1 holdings so far this quarter, one can see that the holdings have kept pace with the market. If you want to see how your performance stacks up to Greenlight’s or just see some of the other stocks it’s invested in, visit tickerspy.com to see the hedge fund’s top holdings and a chart of their combined performance.

Pro portfolio performance is based on institutions’ top-15 holdings as disclosed in quarter-end filings with the SEC. Pro performance does not take into account additional holdings beyond the top 15 nor does it include positions that are not required to be disclosed by the SEC. As such, Pro portfolio performance should be considered an approximation and not a precise record of how an institution has performed over time.

Tags: AHL, EMC, GLD, HAR, HES, LEHMQ, PFE, SATS, TDC, WYE