“I was never a believer that the markets are efficient.”
INVESTMENT FUND: Greenlight Capital
David Einhorn is recognized for his short selling strategy and for anticipating some of the biggest fallouts on Wall Street. Einhorn’s fund has generated an average 25% in annualized net returns by investing primarily in publicly traded American companies and selling off in anticipation of a price drop.
Allied Capital (2002): In 2002, Einhorn recognized that the private equity firm Allied Capital overvalued its illiquid securities. This led to a publicized feud between Einhorn and Allied between 2002 and 2008. In 2008, the SEC found that indeed, Allied did not comply with laws regarding accounting and valuations of illiquid assets. By September 2008, Allied Capital’s stock fell by more than half their value as one of its portfolio companies went bankrupt. A year later, Allied agreed to be purchased by Ares Capital. The sale was confirmed in 2010 with Allied closing for the last time at $5 a share. And David Einhorn was proven to be right.
Lehman Brothers (2007): In 2007 David Einhorn became one of the most talked about investors on Wall Street in the aftermath of his short bet on Lehman Brothers. The billionaire identified that Lehman was exposed to illiquid real estate assets that had been wrongly accounted for. This culminated with the filing of a $2.8 billions loss that led to Lehman’s 2008 bankruptcy filing. Einhorn’s short bet proved to be right once again.
Sprint AeroSystems (2013): Einhorn started a position in Sprint AeroSystems a producer of non-original aircraft parts in Q1 of 2013 making him one of the largest investors in the company. In only two years, the billionaire more than doubled the value of his shares with a +110% gain.
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