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Greenlight Posts a Small May Gain

It was feast or famine for most of David Einhorn’s largest longs last month.

Illustration by II

Illustration by II

Greenlight Capital tacked on an additional 2 percent in May, boosting its gain for the year to 11 percent. The S&P 500 was up 4.8 percent and the Nasdaq Composite rose 6.9 percent last month. For the year, the S&P 500 is up 11.3 percent, including dividends reinvested.

It is not known what drove last month’s gains. Greenlight declined to comment.

The value-driven hedge fund was helped mainly by three major long positions that each rose by double-digit percentage rates last month.

They included Kyndryl Holdings, the firm’s third-largest U.S.-listed long at the end of the first quarter, according to the most recent 13F regulatory filing. The IT infrastructure services provider surged more than 35 percent in May after reporting fourth-quarter results earlier in the month.

Coal producer CONSOL Energy was up more than 25 percent in May. This surge was in contrast to the price of coal in general, which dropped more than 2 percent for the month. Tenet Healthcare, an operator of hospitals and ambulatory surgery centers, was up more than 20 percent.

Solvay, meanwhile, gained nearly 11 percent in May. It is the biggest new position Greenlight established in the first quarter and the company Greenlight founder David Einhorn discussed at the April 3 Sohn conference and alluded to but did not identify in the fourth-quarter letter. It is now a top-five holding.

Belgium’s Solvay is the surviving company after the spinout of Syensqo, a small position Greenlight discussed in its previous letter. Greenlight describes Solvay as a chemicals business whose key products are soda ash (sodium carbonate) and Bicar (sodium bicarbondate), peroxides, silicas, fluorine, and rare earth formulations and solvents.

Greenlight’s gains in May, however, were offset by several big losing positions for the month.

Retailer Office Depot, for example, dropped 21 percent. Alight, a software-based provider of health and wealth benefit and payroll solutions for large enterprises, was down 14 percent last month. Other big losers included annuities seller and No. 2 long Brighthouse Financial, down nearly 8 percent.

Institutional Investor previously reported that Greenlight had been skeptical for some time that the Federal Reserve would cut interest rates early this year. In its first-quarter letter, the hedge fund firm said that early in 2024 it had established a new large position by selling December 2024 SOFR futures. The Secured Overnight Financing Rate is a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities. It is generally used to hedge U.S. dollar short-term interest rates.

“At the time, the market expected the Federal Reserve to cut short-term interest rates between 1.5 percent and 1.75 percent this year,” Greenlight stressed in the letter, acknowledging that it subsequently “trimmed” the position. “Given the strong economy and possibly reaccelerating inflation, we believed this was highly unlikely and expressed our view directly by selling SOFR futures.”