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By
Reuters
Published
Jan 20, 2016
Reading time
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After Greenlight's 2015 dive, Einhorn bets on Macy's

By
Reuters
Published
Jan 20, 2016

David Einhorn, whose Greenlight Capital hedge fund ranked among last year's worst performers, told investors on Tuesday that he has made new bets on stocks including battered retailer Macy's and is currently concentrating on delivering better returns.

Einhorn's fund, which had only one other losing year since opening for business in 1996, tumbled 20.2 percent in 2015. Acknowledging that "we have never had a year where so little went right," Einhorn pledged that the firm would "concentrate on trying to make better returns."

Macy's


But whether the billionaire investor is succeeding some three weeks into 2016 was not clear, considering he has already lost money on the Macy's bet and three of his top five investments, Apple Consol Energy and General Motors are losing money this year.

The fund manager also explained what contributed to 2015's loss, where he lost money every quarter and bet that Netflix and Amazon, two of the best performing stocks, would fall while losing stocks would gain.

In a letter sent to investors and seen by Reuters, Einhorn said he paid $45.69 a share for its Macy's position, getting into an investment where activist hedge fund Starboard Value has been pressing the 158-year old retailer for months to sell off some real estate holdings.

Macy's is trading at $39.01, up 11.7 percent this year, but down from where Greenlight got in.

2016 should be better, Einhorn said, after unseasonably warm weather and a strong dollar weighed on recent sales.

He is also holding open the chance for a change in the company's structure, noting "it wouldn't surprise us if a private equity firm teamed up with a REIT to buy the company and unlock the value privately."

Greenlight bought generic pharmaceutical company Mylan for $45.32, notching a nice gain with the stock currently changing hands at $50.34 a share. Greenlight expects the company to earn close to $7 a share in 2018, fueled by its robust pipeline of respiratory, injectable and biologic drugs.

Last year was horrible for the fund, Einhorn acknowledged, noting that he expected Amazon and Netflix, which surged ahead, to fall while the stock he thought would gain actually fell. So it was time to sell and the most noteworthy liquidation was semiconductor company Micron Technology Inc, Greenlight's biggest winner in 2014 and its biggest loser in 2015.

Greenlight ultimately made money on the bet, selling it at roughly $22.14 a share after having paid $19.93 a share for the investment.

Also gone are its investments in Bank of New York, which generated a small gain, and a bet on Applied Materials, which the fund exited at $18.21, with a small loss.

For now, Einhorn, who lets investors exit his funds only rarely, said he has only "modest redemptions" and that a few clients even wanted to add more money. But he is not accepting new cash now. Known for his sense of humor, Einhorn closed the letter with a quote from the late rock star David Bowie: "I don't know where I'm going from here, but I promise it won't be boring."

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