NEW YORK May 5 Hedge fund manager David Einhorn on Monday lived up to his reputation for being able to send a stock price spinning lower by just opening his mouth.
Shares of athenahealth Inc, the health information technology company, tumbled 13 percent in extended trading soon after Einhorn said his Greenlight Capital is shorting the stock.
As fears percolate that a new bubble is forming, a number of prominent managers at the Sohn Investment Conference cited favorite asset picks, not to buy but instead to sell short in hopes of buying them back for less after they decline.
After rising more than 30 percent last year the Standard & Poor's 500 index is barely positive and having trouble moving much higher.
Traditionally investors presenting their best ideas here discuss stocks they hope will rise. There was plenty of that here on Monday with William Ackman talking about mortgage companies Fannie Mae and Freddie Mac, and Larry Robbins touting health maintenance organizations Humana Inc and WellPoint Inc.
But Einhorn, who unveiled his bet against Lehman Brothers at this conference six years ago, unveiled another short instead, saying athenahealth's share price could drop 80 percent from its current level.
In his quarterly letter to investors Einhorn raised concerns that another bubble was forming and to protect his investors he created a "Bubble Basket" of momentum stocks.
At the Sohn Conference he teased the audience by saying he would reveal one of those shorts but stay silent on the others.
Daniel Loeb, who was not presenting at Sohn on Monday, also sounded a cautious note in his quarterly letter last week by saying that the stock market was showing "bubblelicious valuations."
Like Einhorn, Jeffrey Gundlach, well known for his bond investments, discussed a short bet that underscored his belief that the housing market is more fragile than many economists think.
Gundlach, who co-founded $49 billion DoubleLine Capital, suggested shorting the SPDR S&P Homebuilders ETF, saying that he does not expect a rebound in single-family housing.
Expected rises in mortgage rates plus heavy student loan debt will make it hard for young people to save for a down payment and baby boomers are likely to flood the market with existing homes when they sell out to help finance their retirement.
Similarly Chris Shumway, who runs a private investment firm Shumway Capital, said investors should bet against the Chinese currency, saying China has limited options to deal with slowing growth.
The negative notes also extended to the commodities market where Zach Schreiber, chief investment officer of hedge fund PointState, said he is short U.S. crude oil. "We believe crude oil is going lower, much lower," he noted.
"We don't think U.S. oil will slow production significantly until we go below $80-85 dollars per barrel," he said.
Short sellers suffered last year as the market raced higher. But one of last year's presenters at Sohn, Jon Jacobson who runs Highfields Capital, scored a winner by going short Digital Realty Trust. Over the last 12 months the position outperformed the market by 41 percent.
(Reporting by Svea Herbst-Bayliss; Editing by Richard Chang)