Capitalist David Einhorn, founder and president of Greenlight Capital, must like Karl Marx. At the conclusion of his fourth quarter investment letter, where he announced somewhat yawn inspiring 8 percent 2014 performance after delivering the bulk of that performance – +5.61 percent – in the fourth quarter alone, Einhorn quoted Marx without any seeming context.
“When the train of history hits a curve, the intellectuals fall off.” – Karl Marx
And so ended an investment letter, leaving one to wonder its meaning?
David Einhorn discusses the recent collapse in oil prices
Was their meaning in Einhorn’s discussion of “the recent collapse in oil” and the train of history hitting a curve? Einhorn went on to laud the drop in oil as “generally good for the U.S. economy” because consumers have more money to spend. Perhaps this is where “intellectuals fall off,” as many economic prognosticators have claimed the drop in oil might not be an economic positive.
In the letter, Einhorn discussed how Zachary Schreiber, a Stan Druckenmiller protégée, lived up to his “rising star” billing by predicting the sharp drop in WTI oil prices in July. This led Greenlight to hedge its risk exposure in oil related names such as Anadarko, BP, McDermott and National Oilwell Varco by selling oil futures. As a result of the hedging, the drop in oil and related reduction in value in these oil names did not impact the portfolio to the same negative extent.
David Einhorn’s new long position: Citizens Financial Group, Keysight Technologies and Time Warner
The fund established several new long positions, including Citizens Financial Group, which Greenlight said they purchased at a discount to tangible book value and now expects the company to increase return on equity relative to peers through cost reductions and fee income growth.
Another stock the firm likes because it is undervalued is Keysight Technologies. Keys is a recent spin out from Agilent, which Greenlight said was using it as a cash cow to fund other business units. Now an independent company, it will have the flexibility to invest and manage research and development in a fashion to best optimize a return, the letter said.
Greenlight also established a new position in Time Warner, thinking the firm would likely have to fend off another takeover target at some point. On a value basis, the strategy was that Time Warner’s HBO subsidiary – the “most valuable” of all premium networks – could be better leveraged. Soon after Time Warner announced that HBO would “go over the wall” and offer its programming as a streaming option over the Internet. This could be construed as a train hitting a curve for cable properties with intellectuals falling off, but such comparisons are difficult if tenuous to make.
See the full letter here.
The post Einhorn Cryptically Quotes Karl Marx In Letter To Investors appeared first on ValueWalk.
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