How Einhorn Lost 4% Last Quarter

How Einhorn Lost 4% Last Quarter

David Einhorn's Greenlight Capital funds were down 4 percent during the second quarter, a period that the firm refers to as a "head scratcher" in a new investor letter obtained by CNBC.

"Our five biggest longs reported earnings that met or exceeded expectations, while our shorts announced earnings that mostly disappointed," the July 14 letter said. "Nonetheless, we lost money in the quarter."

Greenlight said its five largest equity longs included AerCap Holdings, Bayer, CONSOL Energy, General Motors and Mylan.

The short book "proved more costly," Greenlight said. The firm has been short what it calls a "bubble basket," but the stocks all gained significantly in the quarter. Some examples cited in the letter included Amazon.com, Athenahealth, Netflix and Tesla.

Outside of the "bubble basket," Greenlight said, its shorts broke even. Those included Caterpillar, whose gains during the quarter were offset by Continental Resources, which declined 29 percent, Greenlight said.

The letter announced a new long position in Toshiba at an average price of 234.79 yen per share, saying that once the company resolves the issues with its bankrupt subsidiary, Westinghouse, the stock would be worth closer to 400 yen per share.

The firm also said it exited an "unusually large number of positions." Greenlight closed long positions in Altice, InterActiveCorp, Liberty Global and Time Warner. The firm also closed short positions in the credit-ratings agencies and Mallinckrodt.

Greenlight also addressed what it called "recent fuss in the media over redemptions."

"Redemptions are routine," the letter said. "If we believed they were harmful, we would seek to replace them. We prefer to grow our assets by generating good returns rather than by raising capital."

The fund has been closed to new investors since the end of 2014. Greenlight said the majority of its redemptions have been from fund-of-funds, which have experienced withdrawal requests of their own.

Greenlight's second-quarter declines, which were net of fees and expenses, brought year-to-date returns to negative 2.8 percent. The S&P 500 Index gained 3.1 percent during the quarter and 9.3 percent year to date.

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