Greenlight Capital Lags Market in Q1 Amid 'Broken' Stock Landscape

David Einhorn's Greenlight Capital returned 4.9% net of fees and expenses in the first quarter of 2024, trailing the S&P 500 Total Return Index's nearly 11% gain, according to a letter to investors. The hedge fund cited a "fundamentally broken" stock market, with most investors disregarding valuation, as a key factor in its relative underperformance.

Despite the challenging market conditions, Greenlight established new long equity positions in companies such as Penn Entertainment, HP Inc., and Roivant Sciences during the quarter. The firm also added a medium-sized macro position to benefit from higher copper prices. "The market has changed," Greenlight stated in the letter, emphasizing the shift in investor focus away from traditional valuation metrics.

Why this matters: Greenlight Capital's quarterly performance and market outlook provide insights into the challenges faced by value-oriented investors in the current market environment. The fund's observations about a "fundamentally broken" stock market highlight the ongoing debate about the disconnect between asset prices and underlying fundamentals.

For the full year 2023, Greenlight Capital was up about 22%, trailing the US benchmark's 26% return. The fund has also disclosed a significant long position in Solvay SA, a Belgian chemicals company, as one of its key holdings.

Greenlight's stake in Penn Entertainment, a regional casino operator, reflects Einhorn's belief that the market is undervaluing the company's land-based casino business and the potential of its ESPN Bet unit. Despite investor doubts following Penn's acquisition of Barstool Sports, Einhorn sees upside in the stock, which jumped 2.41% on the news of Greenlight's investment.

Key Takeaways

• Greenlight Capital returned 4.9% in Q1 2024, trailing S&P 500's 11% gain.
• Greenlight cited "fundamentally broken" stock market, with investors disregarding valuation.
• Greenlight established new long positions in Penn Entertainment, HP Inc., and Roivant Sciences.
• Greenlight was up 22% in 2023, trailing the US benchmark's 26% return.
• Greenlight has a significant long position in Belgian chemicals company Solvay SA.