This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Should You Trust David Einhorn? (Update1)

Stocks in this article: MCOMHPAAPLGMCRMLMMRVLGLRE

(Updates story to say 2012 returns totaled 7.9%.)

NEW YORK ( TheStreet) -- Hedge fund manager David Einhorn of Greenlight Capital said Wednesday that ratings agency Moody's (MCO) was his biggest money-losing short bet last year. As Einhorn made little mention of the short position -- betting on a decline in Moody's share price -- in numerous investor reports and media appearances, the famed short seller's comments raise a crucial question.

Should you trust David Einhorn?

It's a relevant topic, given his front-page battle with Apple (AAPL) over the iPhone and iPad maker's management of its purse strings. Meanwhile at investor conferences, Einhorn's been able to dramatically swing stocks when announcing new trades, such as recent short positions in the likes of Chipotle Mexican Grill (CMG) and materials giant Martin Marietta (MLM).

Consider Einhorn's fourth-quarter letter to investors, which highlighted a souring of Greenlight's investment in Apple, a burned bet against coffee maker Green Mountain Coffee Roasters (GMCR) and a wrong-way trade in Marvell Technologies (MRVL), among a handful of positions that caused the fund to fall in the quarter. A 2012 gain of 7.9% put Greenlight below the overall market.

"Our coffee was too hot, our apple was bruised, and our iron supplements didn't go down smoothly. We got to marvel at a jury's decision to endow a university with a billion dollar verdict, and tried not to get too moody when several of our shorts melted up," Einhorn said in the fourth-quarter investor letter.

In the letter, Einhorn highlighted the short bet in Green Mountain Coffee Roasters as a problematic 2012 trade in the company's short portfolio.

"The losses in the short portfolio were broad-based; while the S&P 500 was down modestly in the quarter, our average short rose about 10%. Green Mountain Coffee Roasters was the worst offender, with a 74% advance that wiped out our 2012 profits on the position," Einhorn wrote in a Jan. 23 investor letter.

As it turns out, Einhorn may have been most "moody" because of a long-running bet against ratings agency Moody's stock, which gained nearly 30% in 2012.

"Our biggest loser on the short side last year was Moody's," Einhorn said Wednesday on a conference call for Greenlight Re (GLRE), an insurer affiliated with the hedge fund.

A look through Greenlight's previous 2012 quarterly investor letters shows little mention of Greenlight's short position in Moody's, other than perhaps the subtlest mention.

Prior to Wednesday, Einhorn's most recent direct reference to the trade came in response to an audience question at an October investor conference.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,805.41 +127.51 0.76%
S&P 500 1,964.58 +13.76 0.71%
NASDAQ 4,483.7150 +30.9230 0.69%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs