Greenlight Capital's David Einhorn said he lost money during the second quarter when the markets tumbled, but the hedge fund firm found a silver lining on the short side as his bet against Green Mountain Coffee Roasters Inc proved to be the biggest winner.
Einhorn, one of the most closely watched managers in the $2 trillion hedge fund industry, also overhauled his portfolio by dumping positions in Dell Inc and Best Buy Co Inc , which he called "particularly irksome" in an investor letter obtained by Reuters.
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The fund added new positions in Cigna Corp and Coventry Health Care Inc, Einhorn said in the note.
Greenlight Capital funds lost 3.2 percent in the second quarter, bringing yearly returns to 3.4 percent, the July 23 letter said.
Hedge funds, on average, lost 2.7 percent in the quarter, according to hedge fund tracking firm HFR. The broader stock market slid 3.3 percent over the period.
Einhorn said a short position in Green Mountain was a big winner in the quarter, as its share price slid from $46.84 to $21.78 over the period.
Known for his prescient call against Lehman Brothers before the financial crisis, the New York-based manager has been a harsh and vocal critic of coffee company Green Mountain since the second half of 2011, when he revealed his short thesis at a conference in Manhattan.
If a hedge fund manager is short a stock, he expects its value to fall.
"The company announced disappointing quarterly results and lowered its guidance," the Greenlight founder said in the July 23 note. "Investors are beginning to consider the ramification of the coming K-cup patent expirations."
Two other undisclosed short positions also helped performance, he said.
Losers included General Motors, Marvell Technology Group Ltd and a position in the Japanese yen.
Einhorn said computer maker Dell had "proved to be a disappointment," with non-PC business growth smaller than expected, so the firm liquidated its position.
Greenlight also sold retailer Best Buy "with a loss" as "unexpected problems emerged" with its business. He cited the depletion of cash resources due to a $1.3 billion acquisition, a decline in profits from Best Buy's international business, and the dismissal of its chief executive "over his personal conduct" as major challenges.
Commenting on the economic crisis in Europe, Einhorn described the situation as "a mess" and lamented that options for a solution to the euro zone's deep and complex problems "range from awful to awful."