In his recent Q4 2023 Letter, David Einhorn highlighted the impressive performance of his fund, which returned 22.1% in 2023, despite unfavorable market conditions and a conservative investment approach. He attributes the success to a shift in their investment style, focusing on:
- Disciplined pricing: Buying undervalued assets
- Investment returns from issuers: Seeking income through dividends, buybacks, interest, or acquisitions instead of relying on market appreciation
He believes this strategy is well-suited for the current market where active investors are less likely to drive up valuations through analysis. His portfolio offers attractive direct returns from the underlying companies.
Here’s an excerpt from the letter:
In a year where the Russell 1000 Pure Growth index outperformed the Russell 1000 Pure Value index by 28%, the Ark Innovation ETF went up 68%, the NASDAQ 100 index advanced 55%, the “Magnificent 7” drove so much of the market return, and we were either ‘bearish’ or ‘neutral’ for the entire year, our result feels remarkable.
We believe that the strong returns and alpha from the long book came from a successful adaptation of our style. We have become even more disciplined about price and emphasize investments where we get paid by the issuers, as opposed to relying on other investors to revalue the security.
Payment can come to us in the form of buybacks, dividends, interest, or in some cases, a take-out from a buyer.
With the decimation of the active fund management industry, we don’t believe we can reasonably expect securities to be re-rated by investors who are actively trying to figure out what they are truly worth. Many of our largest holdings are offering double-digit returns directly to investors.
You can read the entire letter here:
Greenlight Capital Q4 2023 Letter
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