GLRE - Greenlight Capital Re

[Spekulatius]

He is compounding losses consistently. This requires quite some skill to do it consistently in a way Einhorn does it in his „hedged“ Fund:

https://www.gurufocus.com/news/747704/david-einhorn-nears-record-losses-with-september-decline

[Scunny Bunny]

I get the shorts even if they are not working at present; I simply don't get the longs like GM and BHL (where the short thesis has been well argued) and their proportional weightings. Looks a desperate mess. Sad to see.

[Spekulatius]

I think it's funny that this kid was biggest investor and cheerleader in  Sunedison inc which was Enron's second coming.

 

https://d2gr5kl7dt2z3t.cloudfront.net/blog/wp-content/uploads/2014/10/Greenlight-Capital-SunEdison-Presentation.pdf

 

And now he's criticizing Musk and Tesla. Gimme a break!

 

I love the hedge fund jumbo jumbo.

 

SunEdison is a well‐run, financially savvy company, benefiting from an open ended growth opportunity trading at a bargain price.

 

Check:

1) Misunderstood

2) Transformation

3) Open ended growth

 

 

At least this month he should do better- the TESLA short should work out and BHF is up a bit too, due to higher interest rates.

[Lakesider]

Q3 letter

 

https://www.docdroid.net/MfMnIs3/greenlight-capital-q3-2018.pdf

[james22]

Ever a price that this (and TPRE) becomes attractive?

 

Especially so if ever closer to when their shorts might pay off?

[ukvalueinvestment]

Can anyone recommend a book that can I use to educate myself about the reinsurance business?

[Cigarbutt]

Can anyone recommend a book that can I use to educate myself about the reinsurance business?

Hi,

If you're looking for a basic guide, the following may be an adequate option:

https://www.munichre.com/site/mram/get/documents_E96160999/mram/assetpool.mr_america/PDFs/3_Publications/reinsurance_basic_guide.pdf

If you send me a PM, I could send you a report published by IBIS-World in 2017 that is no longer available.

If the topic really interests you, you may want to identify a simple insurer, go back a few years, figure out the type of reinsurance you would buy going forward and then move prospectively through annual reports to compare the relative costs and benefits of reinsurance for that specific company. Ideally, you want to go through an entire cycle but we only live once.

Hope that helps.

 

[CorpRaider]

I think it's funny that this kid was biggest investor and cheerleader in  Sunedison inc which was Enron's second coming.

 

https://d2gr5kl7dt2z3t.cloudfront.net/blog/wp-content/uploads/2014/10/Greenlight-Capital-SunEdison-Presentation.pdf

 

And now he's criticizing Musk and Tesla. Gimme a break!

 

I love the hedge fund jumbo jumbo.

 

SunEdison is a well‐run, financially savvy company, benefiting from an open ended growth opportunity trading at a bargain price.

 

Check:

1) Misunderstood

2) Transformation

3) Open ended growth

 

 

At least this month he should do better- the TESLA short should work out and BHF is up a bit too, due to higher interest rates.

 

Yeah, I decided I've got to put this in the too hard pile due to concerns about process and structure.  Will continue to follow him for ideas.  Did a little post about it.

[StevieV]

Ever a price that this (and TPRE) becomes attractive?

 

Especially so if ever closer to when their shorts might pay off?

 

I don't think so.  Assuming break-even underwriting (which is maybe too favorable an assumption for GLRE), GLRE is a leveraged play on Einhorn's investments.  Per the Q3 letter, for the first 9-months of the year, Greenlight Capital is down 25.7%.  That's versus a positive 10.6% return for the S&P.  This follows 2017's Greenlight return of 1.6%, versus of the S&P at 21.8%.  Underperformed the index in 2016.  2015 is another good year to look at.  Greenlight - (20.2%);  S&P 1.4%.

 

Maybe Einhorn does better in a down market, but I think 2015 through today is a relatively decent look at different market conditions.  It's one thing to underperform a high-flying market, but losing 20% when the market is roughly flat, isn't good.

 

I also think that Greenlight's since inception performance isn't very relevant.  Becomes less relevant by the year.

 

Do I think Einhorn could turn things around and have a great next decade?  I do.  Would I personally put my money with him to find out?  No.

[Spekulatius]

GLRE almost broke $10/ share today, back to the lows during the 2008 recession. Another month of losses - down 28% this year. Good times on the synching ship, Cpt Einhorn:

 

https://youtu.be/MjTuAV036yY

 

https://finance.yahoo.com/quote/GLRE?p=GLRE&.tsrc=fin-srch

[james22]

Also new to the fund in December are shares of Greenlight Capital Re., Ltd. (NASDAQ:GLRE) and Third Point Reinsurance Ltd. (NYSE:TPRE), reinsurance companies with portfolios that mimic the holdings of David Einhorn's Greenlight Capital and Dan Loeb's Third Point (hedge funds), but sell at massive discounts to book value.

 

In theory these companies could be liquidated tomorrow for over 50% more than we paid for them, based on our $8.80s (for Greenlight) and $8.90s (for Third Point) per-share basis vs. their estimated per-share book values in the $14s.

 

These are also bets on a "comeback" by Einhorn, a truly great long-short value investor who (like me!) had his performance crushed by the recent stock bubble, and a resumption of historical outperformance by Loeb.

 

So there are two ways to win here: the gap between the market value and the book value of these companies can close and/or their managers' performance can bounce back and their book values will increase (which in itself would undoubtedly be a catalyst to eliminate the discount).

 

https://seekingalpha.com/article/4232055-stanphyl-capital-letter-december-2018

[scorpioncapital]

I would choose Loeb vehicle over einhorn, gun to head. I've seen some of loebs investments and they appear more intelligent and conservative, if one can say this of two lousy stocks.

[Jurgis]

These are also bets on a "comeback" by Einhorn, a truly great long-short value investor who (like me!) had his performance crushed by the recent stock bubble

 

If someone's great investor's performance is crushed, it's obviously a bubble that's at fault.

[StevieV]

I don't think you can build a rational case for investing in Greenlight.  They best you can have is a "guess" that Einhorn will come back.

 

I don't think it can be more than a guess at this point.  Trailed the index in 2018, 2017, 2016 and 2015.  Often bigly.  It's not a market cycle, but it includes a number of different index result years and now includes one year where the market was down.

 

Trailed the market by another 20%+ last year (Greenlight hedge fund down 34%).  As noted previously in the thread, also was way behind the indexes in 2017 and 2015.

 

Given the extent of the underperformance, I don't think that Greenlight's performance starting from 2015 has any hope of catching the index anytime soon.  That particular metric doesn't affect an investor buying today.  However, it does go to whether Einhorn is a "great" investor, who is being patient and will outperform over time, or not.

[MrB]

I don't think you can build a rational case for investing in Greenlight.  They best you can have is a "guess" that Einhorn will come back.

 

I don't think it can be more than a guess at this point.  Trailed the index in 2018, 2017, 2016 and 2015.  Often bigly.  It's not a market cycle, but it includes a number of different index result years and now includes one year where the market was down.

 

Trailed the market by another 20%+ last year (Greenlight hedge fund down 34%).  As noted previously in the thread, also was way behind the indexes in 2017 and 2015.

 

Given the extent of the underperformance, I don't think that Greenlight's performance starting from 2015 has any hope of catching the index anytime soon.  That particular metric doesn't affect an investor buying today.  However, it does go to whether Einhorn is a "great" investor, who is being patient and will outperform over time, or not.

 

Still it is well proven that the majority of above average compounders underperform 1/3 of the time.

[StevieV]

Still it is well proven that the majority of above average compounders underperform 1/3 of the time.

 

Do you mean, above average compounder companies or above-average compounding stock pickers?

 

In any event, I have a few main points on Greenlight:

 

(1) Einhorn's underperformance has been so great that it will be difficult to make up into market or above-market returns.  It is one thing to underperform by 3-5% for a few years in a row or a larger percentage for a year.  Underperforming by 20% or so multiple years is much more difficult to catch up on.

 

(2)  Einhorn may outperform going forward.  He may outperform greatly.  I just don't believe there is any reason to be confident that he will.  I am not sure that his early days returns, with less capital, is fully instructive.

 

(3)  I think the bull case for Greenlight was the structure + Einhorn.  If the underwriting is break-even or better, then you are hoping to realize Einhorn returns magnified by the float.  In that scenario (or an underwriting profit scenario), you could do well even if the investing returns lag the market a bit.  You just can't do well magnifying negative 34% returns (2018) or negative 20% returns (2015).  Plus, last I looked, the underwriting hasn't been good.  Maybe it has gotten better.

 

StevieV

[Libs]

Ironically, I passed on this because I feared they wouldn't get the underwriting part down. I never dreamed Einhorn would have such dreadful investing results.

[constala]

Well the regulator decided to call the end of recess for David Einhorn's GLRE.

All is left is cash, no management fees paid, and the insurance book, which may get sold- anyone's guess if it will be sold with a discount or premium; with such a bad combined ratio track the odds are GLRE will have to take a loss to offload it to an Apollo or else. Much scrutiny will be on the quality of reserves and underwriting discipline.

 

Last known book value $13, last price $10. It is no more a leveraged bet on the skills of David Einhorn, but rather a sort of safeish, liquidating, 30%ish discount to book value (made of cash+insurance assets/liabilities) closed end fund play.

 

How the mighty can fall!

 

[Peregrino]

Greenlight's performance brings up some interesting distinctions.

 

Most value folks have spent the past few years doing some navel gazing and asking when the cycle will turn and prudence will pay off.

 

Greenlight has been among the most vocal that the current period makes no sense, and it calls to mind the late 90's. 

 

I suspect, though I am too busy/lazy to confirm, that if you looked at BRKs holdings during the late 90's that the issue was not the businesses that BRK owned which were the problem, but rather the market's willingness to pay for them.

 

That is to say that if you calculated the look-through earnings of BRK's portfolio, they would be growing sales and operating profits steadily year after year, but that the market placed a lower multiple on those earnings, and so BRK underperformed.

 

I am not sure that the same would be true of the look-through earnings on Greenlight's portfolio. 

 

To be fair, however, I don't think many would stack up favorably if the Oracle is used as the benchmark.

[samwise]

Well the regulator decided to call the end of recess for David Einhorn's GLRE.

All is left is cash, no management fees paid, and the insurance book, which may get sold- anyone's guess if it will be sold with a discount or premium; with such a bad combined ratio track the odds are GLRE will have to take a loss to offload it to an Apollo or else. Much scrutiny will be on the quality of reserves and underwriting discipline.

 

Last known book value $13, last price $10. It is no more a leveraged bet on the skills of David Einhorn, but rather a sort of safeish, liquidating, 30%ish discount to book value (made of cash+insurance assets/liabilities) closed end fund play.

 

 

Do you have a source? I couldn't find any news. And why is this 30% discount "safe"ish when you doubt the quality of reserves?

[Peregrino]

Form 8-K:  https://www.sec.gov/Archives/edgar/data/1385613/000138561319000076/form8-kmay312019.htm

 

"Item 7.01 Regulation FD Disclosure

 

Greenlight Capital Re, Ltd. (the “Company”) has received notification from A.M. Best & Co. of a revised outlook of its subsidiaries’ Financial Strength Rating of A- (Excellent) from “stable” to “negative” owing to negative underwriting performance and a material decrease in surplus in recent years.  As a result, the board of directors of the Company intends to conduct a strategic review. To reduce volatility near-term, the Company has de-risked its investment portfolio and is holding a majority of its investment assets in cash and short-term treasuries until such review is complete. No investment management fees or performance allocation shall apply to the portion of the Company’s investment portfolio held in risk-free assets.

 

Given the foregoing, effective May 31, 2019, the Company will no longer disclose on its website the largest positions in its investment portfolio or other information relating to its portfolio composition."