Greenlight Capital‘s Q3 letter is out, and Insider Monkey is here to cover it. For the quarter, Greenlight returned a net 6.2%, versus the S&P 500’s return of 4.5%, with the long portfolio generating a strong absolute return, while the short portfolio generating losses but positive alpha. For the year, Greenlight is up 3.3% in terms of net returns.
In the letter, David Einhorn‘s Greenlight notes that Amazon.com, Inc. (NASDAQ:AMZN) ‘revealed a much lower level of long-term structural profitability’ and yet Amazon.com, Inc. (NASDAQ:AMZN) fell less than one percent during the three months. For the market, apparently the fact that Amazon.com, Inc. (NASDAQ:AMZN) can disrupt anyone in retail is good enough.
Similarly, although Tesla Inc (NASDAQ:TSLA) had ‘an awful quarter’, Greenlight notes the stock only fell 6% when it ‘deserved much worse’. Likewise, although competition ‘is heating up’, the market rewarded Netflix, Inc. (NASDAQ:NFLX) with a 21% advance for the period.
As for some other stocks, Greenlight continues to expect the separation between the coal and gas business for CONSOL Energy Inc. (NYSE:CNX) to be completed in 2017, and the fund is ‘surprised that the shares have not re-rated much in anticipation of the event’. Needless to say, Greenlight is pretty bullish on the energy name, particularly in the near term.
In terms of new additions, Greenlight added a new long position in Hewlett Packard Enterprise Co (NYSE:HPE) at an average of $13.29 per share. Greenlight believes Hewlett Packard Enterprise Co (NYSE:HPE) ‘has earnings power of $1.4-$1.70’ over the next few years.
Next, Greenlight re-entered Micron Technology, Inc. (NASDAQ:MU) at around $29.21 per share. Although ‘DRAM will always be cyclical’, Greenlight believes ‘investors are underappreciating the dynamics of the current cycle and the long-term structural improvements in the industry’.
Greenlight also added Tempur Sealy International Inc (NYSE:TPX) at $56.11 for the quarter, writing ‘ we believe the brand strength and customer loyalty.. will allow the company to recapture lost sales through other retailers and direct and online channels’. Greenlight believes Tempur Sealy International Inc (NYSE:TPX) could earn north of $6 per share by the 2019-2020 year.