Hedge-fund manager David Einhorn is struggling to find value amid a five-year stock market rally.
“We had a difficult time finding new investments this quarter,” he said today on a conference call discussing results at Greenlight Capital Re Ltd., the Cayman Islands-based reinsurer where he is chairman. “As the market continues to rise in the face of conflicting economic data, global unrest, and looming overdue Fed exit from quantitative easing we remain cautiously positioned.”
The Federal Reserve has begun to wind down its bond-buying program, known as quantitative easing, as the U.S. economy recovers from the financial crisis. Einhorn has said the central bank’s stimulus policies propped up asset prices and likened the approach to eating too many jelly doughnuts, a habit that can be harmful to long-term health.
The Standard & Poor’s 500 Index has almost tripled from its 2009 low, limiting options to buy stocks at attractive prices. Warren Buffett’s Berkshire Hathaway Inc. ended the second quarter with a record $55.5 billion in cash as the company moderated equity purchases and kept searching for large acquisitions. Paul Singer’s Elliott Management Corp. warned in an investor letter last month that “substantial inflation is occurring in many asset classes.”
Einhorn, best known for betting on a decline in Lehman Brothers Holdings Inc. before the bank collapsed in 2008, oversees investments for the reinsurer and runs the hedge-fund firm Greenlight Capital Inc. His strategy is to bet both on gains and drops in stocks.
Greenlight Re reduced its net-long exposure to 48 percent at the end of June. That compares with March 31 when bets on rising assets exceeded short wagers by about 52 percentage points. Einhorn, 45, trimmed some of the company’s winning investments in the second quarter.
Gains on Apple Inc. and Micron Technology Inc. helped drive an 8.1 percent gain in the reinsurer’s $1.5 billion portfolio in three months ended June 30.
July didn’t go as well. Einhorn said that the portfolio declined 2.6 percent even as Apple gained during the month.
“We had a large number of small losses throughout the rest of the portfolio that summed up to a losing month,” he said. “None of the losses were large, and the real problem was a lack of other significant winners.”
Greenlight Re sank 5.1 percent to $31.89 at 4 p.m. in New York, the biggest drop since November 2012.
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