NEW YORK— David Einhorn, head of hedge fund Greenlight Capital, said on Tuesday that he remained bullish on gold and that earnings growth would accelerate for General Motors Co. later this year.
In a conference call for his Cayman Islands-based reinsurer Greenlight Capital Re Ltd., Einhorn said his optimism about gold “has not changed” and that his investment portfolio now had an equal exposure to gold miners and gold bullion. He said the position was not hedged.
“During the gold selloff in the quarter, we sold a small amount of gold to take advantage of opportunities in gold-mining stocks that were in freefall,” said Einhorn, the chairman of the reinsurer.
Greenlight cut its commodities holdings to $50.5-million (U.S.) in the second quarter from $90.3-million in the first quarter, a regulatory filing showed Monday.
Einhorn, one of the most widely followed hedge fund managers and known for warning about the precarious finances at Lehman Brothers before it collapsed, said on the call: “Overall, we modestly increased our exposure to this area, and our view towards gold has not changed.”
The price of gold plunged 23 per cent in the second quarter, its biggest drop in at least 45 years, due to fears that the U.S. Federal Reserve may wind down its bond-buying stimulus, according to Reuters data.
Gold, typically seen as a hedge against inflation, sank below $1,200 an ounce on June 27 for the first time in nearly three years.
Einhorn added that Greenlight’s investment portfolio had a mid-single-digit percentage exposure to gold bullion and “roughly an equal amount” to gold miners.
Gains from his short bet against the yen currency helped offset losses in the gold position over the second quarter, Einhorn said.
In a previous conference call for his reinsurer last May, Einhorn said a regime change at the Bank of Japan supported his outlook for a weaker yen and stronger gold.
New Governor Haruhiko Kuroda had committed the central bank to a $1.4-trillion burst of monetary stimulus to fight deflation, mainly through purchases of long-term Japanese government bonds.
Einhorn also said GM was “poised for rapid earnings growth later this year,” citing the recent launch of the U.S. automaker’s new pickup trucks and an improving North American business.
He said he still liked Apple Inc. and remained committed to his short bet against Green Mountain Coffee Roasters Inc. Einhorn’s $8-billion hedge fund, Greenlight Capital, owned about 2.4 million shares of Apple at the end of the first quarter.
Einhorn’s reinsurer, with more than $2.75-billion in assets as of June 30, reported a net investment gain of 2 per cent for the second quarter, compared with a year-earlier loss of 3.3 per cent. Its shares were up 3.9 per cent at $26.88 in morning trading.
The reinsurer’s investment portfolio gained 7.9 per cent in the first six months of 2013.
According to a quarterly investment letter released July 26, Einhorn’s Greenlight Capital hedge fund was up 1.2 per cent in the second quarter net of fees and expenses, bringing its net return this year to 7.1 per cent.