David Einhorn has sent out his hedge fund's investor letter for the fourth quarter of 2009 and we get a peek as to what Greenlight Capital has been up to lately. Its six largest disclosed long positions are now Arkema (OTC:ARKAY), Boston Scientific (BSX), CIT Group (CIT), Ford Motor Company debt (F), gold, and Vodafone Group. Over the course of the quarter, Greenlight added 'significant' new long exposure via Boston Scientific, Delta Lloyd (Netherlands: DL), and Vodafone Group (UK: VOD). Greenlight's exposure levels were 95% long and 63% short (excluding credit derivatives, gold and foreign currencies).
For 2009, Greenlight's various hedge funds were up 36.9%, 33.7%, and 30.6%. See how Greenlight stacks up to other major funds in our 2009 hedge fund performance numbers post. We also want to point out an intriguing fact from the letter:
Since inception in May 1996, Greenlight Capital, L.P. has returned 1,397% cumulatively or 22% annualized, both net of fees and expenses.
Over the course of the quarter, Greenlight sold out of "some real dogs" (their words, not ours). The fund sold its longs in Criteria Caixa, Echostar Holding Corp.-A (SATS), Nokia OYJ (NOK), Nyrstar (NYRSF.PK), and IHOP (IHOP) Franchising 7.0588%. Greenlight also covered its short in International Bancshares Corp. (IBOC) as losses in construction loans were not quite what Greenlight expected.
Heading into 2010, Greenlight's portfolio is conservative and its long portfolio is invested in mainly stable, less cyclical businesses. The fund is short businesses that are fundamentally challenged in a difficult economic environment. Also, Greenlight has been moving out of successful debt investments that only have limited upside potential left. Where has Greenlight deployed that capital now? Well, into long equity positions, of course. Yet again, we see that hedge funds have been very net long equities. This also ties in with Bank of America's recommendation of overweighting equities and underweighting bonds.
Einhorn's letter also highlights that his fund is still short Moody's (MCO) and has been on the losing side of this play. However, it sounds like this is a position Greenlight will be in for a while as Einhorn writes,
We agree that the litigation will take time to play out, but doubt that the situation will prove 'manageable' for MCO.
You can see his original short thesis here.
Also, we make note that Einhorn has been long gold (via storing physical gold) for a while, and he continues to maintain this large position.
Embedded below is David Einhorn's Greenlight Capital Q4 2009 investor letter:
You can download the .pdf here.