How are you preparing for a possible market crash in 2024?
gold-backed ETF, is now 89% owned by Einhorn's fund, Greenlight Capital. The increased stake translates to record exposure to gold for Greenlight. Who is David Einhorn you ask? He’s a famous investor with a very good long-term track record.
If you Google him, contrasting articles will show up – a few showing him in a good light and others criticising him for having a few bad years. On the whole, though, the billionaire investor has done quite well for himself. A big reason for Einhorn's longevity is his ability to change his mind and make significant changes to his investment policy in the face of strong evidence.
One of my favourite Einhorn stories dates back to 2009, when he gave a presentation at the Value Investing Congress. Einhorn recalls how he had recommended a home builder stock in the middle of the housing boom. His rationale was that the stock was not as risky than its peers as it had less leverage and owned less land.
And for a while, he was indeed right – the stock quickly shot up 30% within a couple of months. However, it was all downhill from then on. We now know how the US housing bubble burst, courtesy the sub-prime crisis, and how stocks across the board collapsed.
Needless to say, Einhorn's stock also collapsed, delivering a 40% loss over five years for anyone who acted on Einhorn's recommendation. Was the 40% loss a consequence of bad analysis or bad luck? A strictly bottom-up investor would dismiss it as bad luck as almost no one could have predicted the housing bubble in advance. Had the bubble not burst, investors could have made a killing on Einhorn's recommendation, so Einhorn was simply unlucky here, they would say.
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