Einhorn says Greenlight off 13.6 percent in first quarter, predicts recovery

BOSTON (Reuters) - Billionaire investor David Einhorn said on Tuesday he lost a lot of money in the first three months of 2018 and has no ready explanation for the loss, but is sure his portfolio can recover over time.

Greenlight Capital, one of the hedge fund industry’s most closely watched firms, lost 13.6 percent so far this year, Einhorn wrote in a letter to clients dated April 3. Reuters saw a copy of the letter.

“No events or individual positions stand out,” Einhorn said, adding that his losses were broad but shallow. The fund manager, who has been investing for more than two decades, again pinned some of his losses on the market’s taste for growth stocks instead of the underpriced stocks he favors.

Investors are especially eager for a scorecard on how hedge funds have performed during recently turbulent times because many have long marketed themselves as being able to protect capital in all types of markets.

Research firm Eurekahedge said February, when markets began tumbling, delivered some of the steepest losses since the May 2010 flash crash. Most hedge funds are still tallying their performances.

Einhorn said markets did not process news rationally for long in the last weeks. On days there was news about companies “more often than not the market prices followed reported results. The problem was ... all the other days,” Einhorn wrote.

Despite the poor returns, Einhorn again stuck by his portfolio. “Our investment theses remain intact,” he said. “Despite recent results, our portfolio should perform well over time,” he added.

But at the moment even bets against companies that are designed to inoculate funds from heavy losses did not work out well, Einhorn acknowledged. Greenlight has been betting against Tesla Inc, Netflix Inc and Inc. Shorts that exceeded expectations finished the quarter up 19 percent and stunningly, the shorts that missed expectations also finished up 5 percent.

Shorts pay off when the stock price falls.

Einhorn said he adjusted the portfolio by cutting exposures which helped avoid another 1.5 percent of losses. He lost money when he exited short bets against Swedish information technology company Hexagon and U.S. equipment rental company United Rentals Inc. But he made money on exiting chemical company Chemours Co at $31.62 a share after having bought in at $6.97 apiece. He also earned money on his bet on German energy company Uniper.

Reporting by Svea Herbst-Bayliss; editing by David Gregorio and Tom Brown