David Einhorn’s Greenlight Capital returned a respectable 8% in 2014 compared to the Standard & Poor 500’s 13% rise, according to the fund’s fourth-quarter investor letter posted by ValueWalk.
For the most part, 2014 was an incredibly underwhelming year for hedge funds.
According to research firm Preqin, hedge funds on average returned just 3.78%, the lowest annual return since their 1.85% loss in 2011.
In the fourth quarter, Greenlight Capital returned 5.6%, the letter said.
Einhorn also disclosed a new position in Time Warner.
“Since 2009, TWX has refocused its business into a collection of high quality assets including basic cable networks (Turner and CNN), a movie studio (Warner Brothers), and the world’s largest most valuable premium cable network (HBO),” Einhorn wrote.
He continued: “In July, Rupert Murdoch launched an opportunistic take-over bid and the shares soared. The TWX board refused to engage, Murdoch walked away and the stock returned to pre-takeover levels. We purchased a position in TWX at an average price of $US72.72, believing that management would have to respond forcefully to fend off another advance. In particular, we believed that TWX had an opportunity to more aggressively monetise HBO and to reduce costs across the entire company. Management subsequently announced that HBO would be offered as a standalone streaming product in the U.S., along with various other initiatives that have led to an increase in earnings estimates and a rally in the shares, which ended the year at $US85.42.”
New positions aside, Einhorn’s Greenlight made money on a stock that had a wild ride this year. Shire, the Irish pharmaceutical company, is a bet that a number of hedge funds took a beating on.
Back in October, Shire’s stock plummeted after Chicago-based pharmaceutical company AbbVie scrapped its $US55 billion takeover bid. Einhorn used that as an opportunity to buy.
“We subsequently purchased a small-sized stake in SHPG at an average price of $US174.35 and a small-sized state in Covidien/Medtronic arbitrage at an average spread of $US8.79,” he wrote in his investor memo. “After positive quarterly earnings and an investor day, SHPG shares recovered and we exited the position at an average price of $US211.65. Metronic reaffirmed its commitment to buy Covidien and the deal spread narrowed, ending the year at $US1.93.”
Not too shabby.