David Einhorn's Greenlight Capital Inc. posted returns of 4.3 percent in April, owing to his short bets against high-flying momentum stocks and its holdings of Apple Inc. and Micron Technology, according to sources familiar with the hedge fund on Thursday.
The April gains brought the $10 billion hedge fund's gains to 3.1 percent for this year to date. Greenlight, which was down 1.5 percent in the first quarter, said in a letter last week that the hedge fund had started shorting a group of momentum stocks that the firm did not identify.
"There is a clear consensus that we are witnessing our second tech bubble in 15 years," Greenlight said. "In our view, the current bubble is an echo of the previous tech bubble, but with fewer larger capitalization stocks and much less public enthusiasm."
Losses in technology and biotech stocks have hurt a slew of hedge funds in March and April, with the Nasdaq Composite Index dropping more than 5 percent since March 5 when it reached the highest level in almost 14 years.
As for its short position in momentum stocks, Greenlight dubbed them "The Bubble Basket" and added that it had limited its short bets against certain momentum stocks because such bets can be "dangerous" when stock prices become disconnected from companies' fundamentals. "What is uncertain is how much further the bubble can expand, and what might pop it," the letter said.
Greenlight also benefited from its long-term holdings in Apple and Micron. Shares in Apple, one of Greenlight's largest holdings as of the first quarter, were up about 10 percent in April alone while Micron Technology, another large holding, gained more than 10 on the month.
"At quarter-end, the largest disclosed long positions in the Partnerships were Alpha Bank, Apple, gold, Marvell Technology, Micron Technology and Oil States International. The Partnerships had an average exposure of 120 percent long and 71% short," Greenlight said in its letter last week.
A spokesman for Greenlight declined to comment.
(Reporting By Jennifer Ablan)