Greenlight Reinsurance Ltd. (NASDAQ: GLRE) is an off-shore specialty property and casualty reinsurance company. This week, the company reported its Q3 results, which showed a net loss of $118.4 million or $3.29 per share.
Something else: Greenlight's investment portfolio is managed by a top hedge fund manager, David Einhorn. He was the person who publicly criticized -- and shorted -- Lehman before it went bust.
So, it's interesting to listen to the Greenlight conference call to get a sense of Einhorn's strategy.
Now, like many other hedge fund managers, he wasn't able to avoid the storm. In fact, Greenlight's investment portfolio plunged 15.9% for the quarter.
Actually, he increased his overall short positions during the past couple months. Yet, it wasn't enough as the markets underwent extreme volatility. It also didn't help that the federal government banned short selling of about one thousand financial services companies.
OK, so going forward, how is Einhorn positioning his portfolio?
Interestingly enough, he is increasing his net long positions. Although, his focus is on high-quality, cash-flow positive companies that have minimal leverage. He thinks the stock market has already priced in a global recession and that there are a lot of quality companies to choose from.
At the same time, he's still negative on financials and is shorting the sector. Moreover, he's negative on companies with lots of exposure to the consumer. Basically, it's going to take awhile for the U.S. consumer to reduce overall leverage.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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