David Einhorn’s Greenlight Capital is one of the most successful investment companies in the U.S. and managed to beat the S&P500 for the 13th consecutive year in 2011. The quote below is from his Q4 2011 Investor Letter. David has a very straight forward writing style and he tells it as he sees it. I am including this, because I find I usually agree with much of what he has to say about the markets.
Here is one section that I found particularly interesting…
“2012 may be the year in which the currency crisis will no longer be kept at bay by politicians buying time with empty promises. Maybe the fall of the Euro will be the 2012 catastrophe that the Mayans predicted.
With these things in mind, our current strategy is to own cheap stocks of good businesses, largely in the United States. We are more net long equities than we have been in some time, as we believe that many stocks have reached a point where they are simply cheap enough to own even if some trouble awaits us. We are prepared for problems in Asia by continuing to speculate on a much weaker Yen. We have hedged the currency on our European equities, and continue to believe that European sovereign bond prices will fall regardless of whether the crisis is resolved through sovereign default or money printing. Finally, we continue to hold gold and gold mining equities, reflecting our concerns that global fiscal and monetary policies continue to tempt fate.”
The two key points in this quote that jump out at me are:
- He is net long equities. He believes they are cheap enough to own even if there might be some trouble on the horizon.
- He continues to believe that a portion of the portfolio should be allocated to gold and gold stocks as insurance against missteps by the central planners.
Click here to read David's full letter, it's well worth a the read.