David Einhorn’s Q1 2025 letter to Greenlight Capital investors discusses his exited positions in Just Eat Takeaway (AMS:TKWY) and Syensqo (EBR:SYENS). See the full letter at the bottom of this post.
Dear Partner:
The Greenlight Capital funds (the “Partnerships”) returned 8.2%1 in the first quarter of 2025, net of fees and expenses, compared to -4.3% for the S&P 500 index.
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Our practice is to report our performance and compare it to that of the S&P 500 index. We do this to comply with current SEC guidelines as a registered investment advisor. Prior to 2016, we simply reported our return. Obviously, this quarter was very strong on both an absolute and relative basis. So, this is a convenient time to remind you that we do not view our mission as outperforming the S&P 500 index each quarter. Were that the case, we would have a completely different approach to portfolio construction. We would maintain around 100% net long exposure, and be levered long when bullish, and less than fully invested when bearish. We’d overweight stocks we believe would outperform the S&P 500 index, and own stocks in proportion to their index weighting when we lacked a differentiated view. We might also own some stocks that we had a negative view on, but in a smaller proportion than their index weighting. There are many funds that employ this approach. But not us.
We are trying to make sensible investments and to construct a portfolio of both longs and shorts where we believe the reward outweighs the risk. If we make good decisions, our approach should lead to returns that exceed the S&P 500 index over time, while exhibiting demonstrably less risk. And, over the life of the Partnerships, we have done just that. For the last three years, we have achieved our results with zero daily correlation to the S&P 500 index.
We aren’t going to outperform the index in every period, and we aren’t even going to try. A couple of quarters ago we wrote:
We will avoid calling this market a bubble, and simply observe that the dividend yield is low and the P/E ratio is elevated despite corporate earnings being cyclically high, if not top-ofcycle…
However, while we are conservatively positioned with respect to net exposure, we aren’t outright bearish. We are likely to continue to underperform a rising market, as we have all year, but we don’t wish to position ourselves to lose money should the market continue to rise.
Navigating the Early Challenges of Trump’s Second Term
Our last letter highlighted the uncertainty created by the Trump Administration. We are now only about 5% into President Trump’s second term. It is like being at the gym, attempting a set of 20 push-ups, and already feeling exhausted after completing just one.
We hate to make these quarterly letters about politics, but policy is having such a large impact on global markets that we think it’s apt to share a few observations in as nonpartisan a manner as possible. We will skip any discussion of social policy, which is less relevant as an investment consideration. Greenlight employs people who support both parties, and we know that you, our partners, are similarly split.
With that said, here are a couple observations:
- The news cycle changes very rapidly. If you like the latest news, enjoy it for two hours. It will change. If you don’t like the news, wait two hours, it will change.
- Don’t get lost in the details. The Administration says a lot of things. The details change a lot. But the big picture is relatively clear… we think.
So, what is the big picture?
- The Administration is a disruptive entity. It is not upsetting the proverbial apple cart. Rather, it is upsetting ALL of the apple carts at the same time. These are ‘go-fast and break-things’ people. It is a very high-risk strategy that they hope will lead to large transformations in many areas. It may or may not work out as they expect, but in the meantime, it creates a lot of chaos. It may turn out that going fast and breaking things is not the greatest idea when it comes to geopolitics and the global economy.
- The present foreign relations strategy is called America First. There are many isolated grievances (some quite legitimate) that America has with other countries. Rectifying unfairness is being prioritized over previous themes such as promoting democracy and supporting capitalism, economic development and freedom around the world. Some actions might go beyond the grievances and seem more like conquests. This can mean alienating allies and bullying anyone perceived as weak. Perhaps, this will lead to Europe paying for its own defense and Japan importing American automobiles. Perhaps, America First could turn into America Solo.
Investment Implications of a Politically Driven Economic Slowdown
So, what are the investment implications of all this?
First, we believe that the economy was already in a slowdown even before the Liberation Day tariff announcements. The DOGE cuts have had a much bigger impact on sentiment relative to the savings achieved. If you are a civil servant, if you work in the non-profit sector, if you work in scientific research funded or partly funded by the government, if you work at a federally funded university, if you are a government contractor or consultancy, or if you work in DEI or climate change, you have a serious risk of losing your job and your income. These jobs are disproportionately held by Democrats. Economic sentiment surveys show enormous divide across party lines. We observe that post-election, the Republicans are mostly ebullient, while the Democrats are depressed. While many think the Democrats’ response is political, we think their negative sentiment is economically understandable and is translating into restrained spending.
We believe that this was leading to an economic slowdown even before the trade announcements, driven by reduced consumption activity by those negatively affected. We have added several short positions in consumer companies that cater to liberal tastes.
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Second, regardless of where trade policy eventually settles, it is contributing to the growth slowdown. There has been a surge of economic activity that front-ran the tariffs. That needs to be digested and could lead to lower near-term production. Further, tariffs are a tax – and a regressive one at that. At least some of the tariff cost will get passed on to the consumer. Additionally, companies that face less competition due to tariffs can raise prices.
Less consumption and job cuts create a slowdown, and quite likely a recession. We may already be in one now. It is not uncommon for economists to backdate recessions. What follows from that, of course, is lower corporate earnings and likely lower stock prices.
Portfolio Positions
Hang in there. Just 19 more push-ups to go.
To briefly summarize our first quarter results, on a gross basis we lost 1.3% in our long portfolio, made 5.8% in our short portfolio and made 5.3% in macro. That’s a total gross return of 9.8%, and a net return of 8.2%
Brighthouse Financial
The biggest long winner was Brighthouse Financial (NASDAQ:BHF), which rose 20.7% during the quarter. According to media reports, the company has hired Goldman Sachs and Wells Fargo to sell itself. There appears to be a lot of interest from large asset managers that would like the opportunity to manage BHF’s approximately $120 billion general account. While there is a risk the current market turbulence could derail a deal, absent that we expect the company will be successful in selling itself at a healthy premium.
Core Natural Resources
The biggest long detractor was Core Natural Resources (NYSE:CNR), which declined 27.6% during the quarter. CNR was formerly CONSOL Energy (CEIX). It completed its merger with Arch Resources in January. The combined and renamed company has suffered from falling coal prices in 2025 and reduced production due to a fire in one of its mines. There is also a risk that the escalating trade war could harm CNR’s exports. However, the combined company has a conservative balance sheet and has the capacity to repurchase a lot of stock this year. It is also likely to benefit from President Trump’s executive orders supporting the coal industry.
In the macro portfolio, gold was by far the biggest winner. It advanced 19.0% during the quarter. We hold part of the position in gold bars and part in call options. We also made profits on our previously discussed inflation swaps and SOFR futures positions.
As we are trying to maintain a low level of gross and net exposure, we did not enter into any other new positions that merit disclosure and discussion.
Just Eat Takeaway and Syensqo
We exited a couple of notable long positions. Just Eat Takeaway (Netherlands: AMS:TKWY) agreed to be acquired by Prosus. We sold after the stock price appreciated 52% (a 227% net IRR over a five-month holding period). We also sold our position in Syensqo (Belgium: EBR:SYENS) after just over a year with a -13% net IRR. We were hoping the company would be re-rated due to its higher quality businesses. We decided to make room for another idea in the same industry.
At quarter-end, the largest disclosed long positions in the Partnerships were Brighthouse Financial, Core Natural Resources, Green Brick Partners (NYSE:GRBK), Lanxess AG (ETR:LXS) and Solvay SA (EBR:SOLB). The Partnerships had an average exposure of 86% long and 67% short.
“Experience is a marvelous thing. It enables you to recognize a mistake whenever you make it again.” – Franklin P. Jones
Best Regards,
Greenlight Capital
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