Greenlight Posts a Loss in February

David Einhorn’s fund sharply lagged the market last month.

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Illustration by II

Greenlight Capital suffered a major setback in February.

The hedge fund firm headed by David Einhorn lost 4.2 percent for the month as the S&P 500 jumped 5.3 percent, including dividends reinvested, according to a person who has seen the results. Greenlight was down 40 basis points through the first two months of the year. It is unknown what accounted for the February loss.

However, the firm had been more bearish than most other hedge funds for some time, and many of its shorts must have been badly hurt. To be sure, that bearishness adversely affected its funds in the final two months of 2023, when the market surged. In its fourth-quarter client letter, obtained by Institutional Investor, Greenlight noted that during that time its short book performed poorly.

“Bubble-like conditions returned for the most speculative stocks, and a handful of our shorts went parabolic,” it said.

So although Greenlight was up 22.1 percent last year, it lost 4.3 percent in the fourth quarter when the market took off. For the year, its shorts cut into performance by nearly 26 percentage points, according to the fourth-quarter letter. So perhaps February was an extension of that fourth quarter.

But shorts were apparently not Greenlight’s only problem in February. Several of the largest longs also lost money for the month. For example, coal producer CONSOL Energy, Greenlight’s second-largest long, dropped more than 9 percent. Brighthouse Financial, a marketer of annuities and life insurance, fell about 10 percent.

Otherwise, the firm’s largest longs fared pretty well in February. Green Brick Partners, a home building and land development company and Greenlight’s largest U.S.-listed long, was up more than 12 percent. Information technology infrastructure services provider Kyndryl Holdings gained 7 percent for the month. It was the firm’s fourth-largest U.S.-listed long at the end of December. Tenet Healthcare, an operator of hospitals and ambulatory surgery centers and the firm’s fifth-largest U.S. long at year-end, surged 12.4 percent for the month.

II previously reported that the firm told clients in its fourth-quarter letter that it had established medium-size positions in Alight Solutions, a software-based provider of health and wealth benefits and payroll solutions for large enterprises, and Viatris, a manufacturer of generic and off-patent branded drugs. Sure enough, Alight rose 1 percent and Viatris gained more than 4 percent in February. Shares of Alight are now up nearly 12 percent from the average price of $7.98 that Greenlight paid for its position, and Viatris shares have jumped 12.6 percent from the firm’s average purchase price of $10.63.