David Einhorn Q3 Letter to Shareholders

David Einhorn, Hedge Fund manager of Greenlight Capital made various comments in his quarterly letter to shareholders about Green Mountain, The Federal Reserves continued stimulus, Apple, Chipotle, Yum Brands (Taco Bell) and Vodafone.

The Greenlight Capital funds (the “Partnerships”) returned 4.3%, net of fees and expenses, in the third quarter of 2013, bringing the year to date net return to 11.8%.

Einhorn talks about the Earnings Expectation Conflation, as a limbo bar that is consistently being lowered while the goal is to make it over the bar not to fall under. He talks about the Vodafone acquisition vaguely calling the stub a discount to the sector.
“At 4.5x 2014 EBITDA, the VOD “stub” trades at a notable discount to its sector and is a possible acquisition candidate.”


Einhorn said the following regarding Chipotle

“Unfortunately for us, the market has rewarded CMG with an expanded P/E multiple, which is quite surprising in the face of falling comparable store sales, slowing and disappointing earnings growth, and a loss of pricing power. Such is the nature of the current market environment.”

He also had the following to say about valuations on some newly issued IPO’s and companies without viable earnings or even plans to be profitable in the future.

“Over the last year and they continue to invest accordingly. When “high short interest” becomes a viable stock-picking strategy and conventional valuation methods no longer apply for many stocks, we can’t help but feel a sense of déjà vu. We never expected to find ourselves in an environment like this again, given the savings that were lost when the Internet bubble popped.”

Full Greenlight Capital Shareholder Letter


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