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How To Invest Like David Einhorn

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How To Invest Like David Einhorn

David Einhorn is well known in the financial markets as an activist investor and notable short seller.

Einhorn is public with his positions and not afraid to pressure companies to make changes to improve shareholder returns.

Long-Short Method: The usual way to invest like Einhorn is to use the long-short equity method.

Einhorn is a firm believer in taking long positions of companies he believes are undervalued and shorting shares of companies he thinks are overvalued or have accounting issues.

He looks at a company’s intrinsic value in seeking to achieve constant returns.

Bet Against Lehman: One of Einhorn's most famous bets was against investment bank Lehman Brothers in the lead-up to the 2008 crash.

He openly questioned the balance sheet of Lehman Brothers and took a short position against the company.

When Einhorn began making public comments against Lehman, the company's shares were at $65. Their fall ended with bankruptcy.

Related Link: Musk Vs. Einhorn: Tesla CEO Offers Hedge Fund Manager A Pair Of Short Shorts

Notable Tesla Bear: Einhorn isn’t afraid to publicly bet against any company, including one with a large cult following: Tesla Inc (NASDAQ: TSLA).

Einhorn accused Tesla of being a fraud, focusing on the company’s acquisition of SolarCity.

The most recent third-quarter report from Einhorn’s Greenlight Capital showed its performance was hurt by the Tesla short position.

Einhorn said that Tesla mania was the reason to blame for the poor quarter’s results.

Tesla CEO Elon Musk has publicly called out Einhorn for his short call, offering him an ironic gift of a pair of shorts and inviting him to the Tesla headquarters.

Einhorn has said he has no intention of removing his short position.

Strong Returns Until Recently: Greenlight Capital saw average annual returns of 16.5% from 1996 through 2018. The fund averaged annual returns of 29% from 1996 through 2006.

Einhorn has made several big calls that have not gone well and dragged down overall performance.

Not Afraid of Large Companies: Einhorn is not afraid to take on large companies.

Besides Lehman and Tesla, over the years he has also pressured Apple Inc (NASDAQ: AAPL), Microsoft Corporation (NASDAQ: MSFT) and General Motors (NYSE: GM), publicly calling for changes to their board of directors or payouts.

Image credit: PokerListings, YouTube

 

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