David Einhorn's Greenlight Capital released its second quarter letter to investors in a letter dated July 14, 2017. The fund returned (4.0%), net of fees and expenses during the quarter, bringing the YTD net return to (2.8%).

Einhorn called the quarter "a bit of a head-scratcher" as their five biggest longs met or beat expectations, while their shorts mostly disappointed. "Nonetheless, we lost money in the quarter," he exclaimed.

The firm's five biggest longs are: AerCap (NYSE: AER), Bayer, CONSUL Energy (NYSE: CNX), GM (NYSE: GM) and Mylan (NYSE: MYL).

Meanwhile, the firm's 'Bubble Basket' short stocks proved "particularity frustrating".

• Amazon (NASDAQ: AMZN) rose 9% following a beat and its acquisition of Whole Foods. Einhorn notes Amazon didn't explain the implications and strategy, leaving it to the market's imagination, which he said 'skews optimistic' for the time being.
• athenahealth (NASDAQ: ATHN) rose 25% after Elliott Management disclosed a large stake. While he can't say for certain someone won't pay up in a buyout, they don't think the math works for a going private deal. "With a $5.6 billion market cap, only $120 million of expected EBITA, no historical free cash flow after capital spending, and rapidly decelerating revenue growth, we don't see how an acquisition works for a buyer."
• Netflix (NASDAQ: NFLX) rose 1% despite missing guidance for new customers and increased cash burn forecast. He highlights that the company is funding its cash burn with debt.
• Tesla (NASDAQ: TSLA) rose 30% in the quarter as bulls see Elon Musk as the next Steve Jobs and TSLA as the next Apple. He highlights a few distinction from Apple: When Apple launched the iPhone it was immediately profitable. Apple always cared about profits. Apple benefit from a network effect, which Tesla is unlikely to see. Competition for Apple was very slow but for Tesla every major car company in the world plans to compete. Steve Jobs attracted and retained a senior team of loyal lieutenants, while Elon Musk is a one-man show and distracted by his many ventures.

The firm added a new long in Toshiba at an average price of yen234.79 per share.

The firm closed out longs in Altice, IAC (NASDAQ: IAC), Liberty Global, Time Warner (NYSE: TWX).

The firm ended their decade-long shorts of the credit rating agencies, including Moody's (NYSE: MCO), and closed out a profitable short in Mallinckrodt (NYSE: MNK).

Letter

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