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Greenlight Capital’s Q2 2019 Investor Letter

Greenlight Capital is a New York-based long-short value-oriented hedge fund founded by David Einhorn in 1996. The fund is invested mainly in publicly traded corporate debt offerings and equities. Einhorn, a Cornell University alumnus, made it to the list of the Time 100 Most Influential People in 2013. As of February 2018, his net worth is at $1.52 billion, which makes him the 18th highest-earning hedge fund manager in the world.

Greenlight Capital recently released its Q2 2019 Investor Letter – a copy of which can be downloaded below. According to the letter, Q2 was a solid quarter for the firm. The fund returned 5.8%, which brings a year-to-date (YTD) return of 17.4%.

“Dear Partner:

Our 2019 continued with another solid quarter. The Greenlight Capital funds (the “Partnerships”) returned 5.8% for the quarter, bringing the year-to-date return to 17.4%. Each of the long portfolio, the short portfolio and macro generated a positive return in the quarter. We had five significant winners – Tesla (TSLA, short), gold, Adient (ADNT), General Motors (GM) and AerCap (AER) – which were partially offset by losses in CNX Resources (CNX) and Ensco (ESV).

In many respects, Pets.com is remembered as the poster child of the 2000 internet bubble. After all, who can forget a sock puppet and a business model of distributing pet food and supplies over the internet at negative margins? But some context is in order. Pets.com was backed and majority-owned by Amazon.com. It raised approximately $82 million in its IPO and achieved a peak market capitalization of less than $400 million. It acquired over 500,000 customers before it eventually failed. Pets.com described itself in a 10-Q from 2000 as follows:

Pets.com, Inc. is a leading online retailer of pet products, integrating product sales with expert information on pets and their care. We are committed to serving pets and their owners with the best care possible through a broad product selection, expert information and superior service. We seek to address the entire pet products market, transcending the limited product selection of superstores, specialty stores and grocery stores. Our broad selection of approximately 15,000 SKUs is integrated with extensive pet-related information and resources designed to help consumers make informed purchasing decisions.

For those that think the 2000 bubble was the big kahuna, consider Chewy (CHWY), which went public in June 2019. CHWY described itself in its registration statement as follows:

Our mission is to be the most trusted and convenient online destination for pet parents everywhere. Since our launch, we have created the largest pure-play pet e-tailer in the United States, offering virtually everything a pet needs. We believe that we are the preeminent online destination for pet parents as a result of our broad selection of high-quality products, which we offer at great prices and deliver with an exceptional level of care and a personal touch. We are the trusted source for pet parents and continually develop innovative ways for our customers to engage with us. We partner with more than 1,600 of the best and most trusted brands in the pet industry, and we create and offer our own outstanding private brands.

Over its life, Pets.com chewed through just over $200 million of investor capital. CHWY has burned $1.6 billion and counting. Analyst consensus is that CHWY will achieve modest operating profits in 2023. Its market value is nearly $14 billion – more than 30x Pets.com at its peak. There is a saying that over the short-term the market is a voting machine and over the long-term it is a weighing machine. We look forward to a time when there is more weighing and less voting.”

You can download a copy of Greenlight Capital’s Q2 2019 Investor Letter here:

Greenlight Capital’s Q2 2019 Investor Letter

You can also see the list of our 2019 Q2 investor letters and download them on this page.

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