Should You Trust David Einhorn? (Update1)

(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.

Einhorn's coyness and his increasingly public stature raise big questions, especially as the successful short seller of Lehman Brothers wages his most public activist campaign in a suit against Apple over its 2013 shareholder proxy.

Meanwhile, as pressure against ratings agencies heats up in the wake of a Department of Justice lawsuit against McGraw-Hill-owned Standard & Poor's, Einhorn may be poised to battle investors as notable as Warren Buffett of Berkshire Hathaway ( BRK.A), who remains Moody's largest shareholder, according to Securities and Exchange Commission filings and comments made to CNBC.

"We believe the recent case against S&P is a negative for the rating agencies and Moody's is not immune," Einhorn said, disclosing that the hedge fund is now also short S&P's parent company McGraw-Hill.

Jana Partners, an activist fund that has waged a successful campaign to unlock value at McGraw-Hill, remains a large investor, according to a February SEC filing.

But it might be time for investors to wonder what else Einhorn is keeping from the public?

For instance, after presenting a short trade against Martin Marietta in May 2012, Einhorn made little mention of the position despite a near 40% run-up in the company's stock.

Could Martin Marietta actually be a big Greenlight money loser of 2012? It's unclear, given the company's stock performance and Einhorn's characterization of the 2012 performance of short trades.

Einhorn's wording -- or lack thereof -- leaves a lot to speculation.

If the often right-minded short seller is going to successfully use a bully pulpit to press opinions such as the prospect of a $4 to $6 a share perpetual preferred dividend paid by Apple and short trades in the likes of Chipotle Mexican Grill, Green Mountain and Martin Marietta, he might want to consider being more forthcoming about the performance of those positions and opinions.

Given Einhorn's seemingly growing communications with the investing public, it comes as a bit of a surprise that a short bet against Moody's was Greenlight's worst short position in 2012.

Such opacity undermines the hedge funder's credibility just as he tries to press a case against Apple's management to the investing public.

To Einhorn's credit, he spent the first part of his October presentation at the Value Investing Congress urging investors to seek their own analysis on long and short stock stock investments. Still, a public Apple campaign undercuts a hesitation to pitch the ordinary investor.

In the fourth quarter, Einhorn's Greenlight Capital portfolio fell 4.9%, putting returns for 2012 to 7.9%, underperforming the S&P 500.

Notably, stocks in Greenlight's short portfolio rose roughly 10% in the fourth quarter, significantly outperforming index gains and hitting the fund's overall performance.

Jonathan Gasthalter, a media spokesperson for Greenlight Capital at public-relations firm Sard Verbinnen, declined to comment beyond the hedge fund's positions public filings.

-- Written by Antoine Gara in New York

More from Opinion

Elon Musk's Latest Twitter Tirade Is the Dumbest Thing on Wall Street

Elon Musk's Latest Twitter Tirade Is the Dumbest Thing on Wall Street

Elon Musk's Twitter Tirade Is the Dumbest Thing on Wall Street

Elon Musk's Twitter Tirade Is the Dumbest Thing on Wall Street

Why Google's Search Momentum Won't Be Badly Hurt by New EU Rules

Why Google's Search Momentum Won't Be Badly Hurt by New EU Rules

Flashback Friday: Amazon, Chip Stocks, Memorial Day

Flashback Friday: Amazon, Chip Stocks, Memorial Day

Time to Talk Tesla: What Happened This Week, Elon?

Time to Talk Tesla: What Happened This Week, Elon?