Thanks to Netflix’s explosive results and Stargate AI excitement, tech is likely driving Wednesday’s Wall Street advances.
Not everyone falls in the Big Tech superfan category. Based on a just-released fourth-quarter letter, take Greenlight Capital, the hedge fund started and run under David Einhorn, which had “limited exposure to either side of the book” to those drivers of the 25% return last year. The funds returned by Greenlight last year came somewhat above 7%.
“We have kept a smaller-than-average net market exposure and remain worried about the market’s general value.As high as we can remember are cyclically and interest rate adjusted valuations,” said Greenlight.
Although earlier favorite Apple (AAPL) has had no income increase in the past few years, its price/earnings multiple soared to 37 times from 22. There is no reason the hedge fund sees why that should go higher “or what the investment appeal is at this valuation.”
Regarding what the company does, Greenlight recently changed their stance in the later half of last year in fitness group Peloton (PONT). The company’s subscription-based business model has helped it to “maintaining a loyal and engaged customer base,” and it is depending on cost-cutting strategies, which, should it successful, may offer “significant upside” for the stock.
It took a medium-sized posture in CNH Industrial (CNH), a company beset by an industrial slump, and see revenues resuming to rise sometime this year.
In managed Medicaid behemoth Centene (CNC), whose shares are selling at a historical low, Greenlight adopted a lesser stance. Basically, the hedge fund believes, predicted Trump administration headwinds might not materialize and could be more than offset by a repricing of its basic Medicaid business.
Following the sale of the premium fashion firm to Coach owner Tapestry (TPR), Greenlight made a “moderate loss” in Capri Holdings (CPRI). Still, it sees “strategic potential” for Capri’s Versace and Jimmy Choo brands and added to that position saying Capri’s “terrible” interim performance were mainly due to managerial preoccupation.
Expectations for the end of the war in Ukraine saw the fund dump ETFs linked to defense. Tenet Healthcare (THC) on worries the multinational healthcare services firm may fair less well under Trump; it divested workplace and technology solutions group ODP owing to a declining competitive position.
The shareholder letter spends a reasonable amount of space disparaging the cryptocurrency industry and noting that we might be in “the fartcoin stage of the market cycle.” That relates to the memecoin developed last year that surged to almost a $1 billion in market value. According to the company, its only uses are trading and speculating.
Greenlight said nothing will stop more tradable currencies being introduced with the memecoins of President Donald Trump and Melania lately breaking onto the bitcoin market. “It’s anybody’s guess as to what will happen next, but it feels like it’s going to be wild,” says Greenlight.
Not rely on a strategic U.S. bitcoin reserve, though. “More likely, cooler heads will decide that the government should not borrow another trillion dollars in the bond market to speculate in bitcoin and that there is, in fact, nothing strategic about doing so,” argues the fund.
Its crypto behavior? Due to high financing costs, short positions in levered single-stock ETFs MSTU MSTU and MSTX – “destined to fail” – somewhat offset by owning MicroStrategy (MSTR), the bitcoin buyer and holder those funds monitor. That play qualified as a “material winner in the quarter.”
