Greenlight Capital Re 1Q17 Earnings Call Notes

David Einhorn – Chairman

Seems less likely that the Rite Aid acquisition will see regulatory approval

“Rite Aid was our biggest detractor during the quarter as the company’s proposed merger with Walgreens did not close as expected. We’ve trimmed our position as circumstances have changed, and it now seems less likely the merger will see regulatory approval.”

The bubble will eventually pop

“Our bubble basket of shorts including Tesla also detracted from our performance during the quarter. For the time being, investors remain hypnotized by Tesla’s CEO. They’re skeptical that the company will be able to mass market its model 3 volumes and margins that justify the current valuation. The enthusiasm for Tesla and other bubble basket stocks is reminiscent of the March 2000 dot-com bubble as of the case then, the bulls have rejected conventional valuation methods for a handful of stocks that seemingly can only go up. While we don’t know exactly when the bubble will pop, it eventually will.”

Bought Conduent and Perrigo

“We added a couple of new small long positions during the quarter. We bought Conduent, a Xerox spinoff. We believe the management will renegotiate our exit under earning contracts, run off on profitable business units and simultaneously cut costs, which will lead to improved earnings and revenue growth over the next few years. We also added Perrigo, a private label manufacturer OTC pharmaceutical products. Perrigo is poised to grow its profits in its core U.S. OTC business and to expand margins as it streamlines its portfolio of European OTC brands.”

Greenlight RE 4Q16 Earnings Call Notes

Made changes to the portfolio in response to the election

“Yeah, we have made several changes to the macro portfolio in response to the election. There was various long positions in sovereign fixed income that we eliminated. We added some additional shorts in sovereign fixed income and we added to our long equity exposure.”

Greenlight Capital 3Q16 Earnings Call Notes

David Einhorn – Chairman

YTD return at 2.1%

“Thanks, Bart, and good morning, everyone. The Greenlight Re investment portfolio returned 3.1% in the third quarter, bringing the year-to-date return through September 30 to 2.1%. Our long portfolio added 8% in the quarter while, the short portfolio detracted 4.1%, macro positions were essentially flat.”

I’m sure various securities will be impacted by the election

“I’m sure it matters to a lot of the holdings. It is not clear what it matters to the portfolio as a whole, however…The portfolio is a mix of longs and shorts, and I’m sure various of the securities will be impacted in different ways based upon whatever the outcome of the election is.”

Miscellaneous Earnings Call Notes 2.26.16

Dean Foods FY 1Q16 Earnings Call

Gregg Tanner

Global milk production continues to increase

“We expect global dairy fundamentals to continue to be overall supportive to our business as production growth continues to outpace demand. Year-over-year, total milk production from the top seven exporters continues to increase, albeit at a much slower pace compared to the initial robust expansion experienced in 2014.”

Export volumes continue to decline

“I think the other thing that wasn’t in our prepared remarks is that we’re seeing export volumes continue to decline, so it’s leaving more milk in the U.S., which I think will help us longer term to kind of keep the prices more manageable as well.”

Greenlight Capital Re’s (GLRE) David Einhorn on Q4 2015

Entered 2016 with lowest short exposure ever

We entered 2016 with 16% net exposure, the lowest we’ve entered any year. The Greenlight Re investment portfolio returned 1.2% in January while the S&P 500 fell about 5%. Our shorts have been helpful and returned 7% in January. We started to see some reversion in the market in January and February as the markets have sold off we become a little more net long as our shorts have fallen in value and we found a few things to buy.”

Consumer could come to the rescue

“On the bright side, the U.S. consumer may come to the rescue as we are nearing full employment, wages are slowly rising and there is an effective tax cut in the form of low energy prices. It remains to be seen whether the U.S. consumer will provide support for corporate earnings and if not at least we hope they buy iPhones, GM cars, and Michael Kors bags particularly at Macy’s.”

Heidrick & Struggles International’s (HSII) CEO Tracy Wolstencroft on Q4 2015 Results

Everyone is focused on the volatility but no one is frozen by it

“We are all like you looking at the opening of 2016 and seeing the volatility, whether it would be how it emanates from Asia, from the energy markets, consequent knock-down effects in financial services, etcetera. We find in our client dialogue that while everyone is focused on it, no one is frozen by it. That may – does that that evolve? We will see. But I would say that every – certainly myself in meetings with clients as well as in meetings with our consultants, we are trying to get a barometer on what you are asking every single day. And it would be very difficult for us to give a broader trend line to what I just described.”

Rich Pehlke

Certainly seeing volatility in economic conditions affect client decisions

“We certainly are seeing the current volatility in the economic conditions factoring the client decisions about what they are doing and what they are thinking about the growth of their business and how they are going to deploy capital. The good news is as we have said many times is that talent is the hot agenda item for most leaderships and boards today. But at the same time, capital deployment certainly has an impact on driving our business. Where we have probably seen the most is as is consistent with what you have read in the news, where we probably see the biggest volatility right now is in the APAC region, simply because of the impact of China and what you see going on there in terms of people thinking about the region itself. And then certainly from a sector standpoint, we have seen more discussions and commentary in areas like financial services, which really are driven by large financial institutions from larger banks and obviously they moved and certainly have an influence on some of that. ”

Edison International (EIX) Theodore F. Craver, Jr. on Q4 2015 Results

SCE is a “wires focused business”

“We have positioned SCE as a wires-focused business, consistent with our views on industry transformation and in alignment with California’s public policy objectives to move the state to a low carbon economy.’

Bank of Montreal (BMO) William A. Downe on Q1 2016 Results

Surjit Rajpal – Chief Risk Officer, BMO Financial Group

Delinquency tick ups because the quarter ended on a Sunday?

“The question that you asked relates to the fact that this quarter again was on a weekend. And the difference between this quarter and the last quarter was that this quarter was on a Sunday, as opposed to ending on a Saturday, which really means that two days of payments that you would normally receive had to be deferred to the Monday following. And that explains the difference, because right after the weekend, the delinquency rate did go back to normal levels. So, I wouldn’t read too much into the early-stage delinquencies that you see in the chart there.”

90 day delinquencies have increased in Alberta

“So, when I look at the 90 days, you did notice that there was a quarterly increase of 14 basis points year-over-year, and that is telling in some ways. And we looked at Alberta in that respect as well, because your question if it’s more related to what’s going on in Alberta. In Alberta, year-over-year, there has been an increase of 34 basis points, which is actually much more telling. ”

Stifel Financial (SF) Ronald J. Kruszewski on Q4 2015 Results

IPOs were down 65% in 2015

“The number of priced U.S. IPOs in the fourth quarter of 2015 decreased to 32 from 68 during the same time period. That’s really down 53%. For the full year of 2015, the overall U.S. IPO market was down in terms of both number of transactions, which were down 41%, and dollars raised, down 65%. Certainly a difficult year in the IPO market and not starting off particularly strong this year.”

The reality versus the market’s perception are completely different

“The reality sometimes of what’s going on versus the market’s perception are completely different. This is one of those times.”

Target (TGT) Q4 2015 Results John J. Mulligan – Chief Operating Officer

Customers trust that you’re in stock

“What I think is much more important, when you talk about essential categories, ultimately this is about the guests trusting that you will have the merchandise they want when they come in our stores. If a new mom takes her baby out in 10-degree weather for diapers and formula, you better have diapers and formula in your store.”

HP (HPQ) Dion J. Weisler on Q1 2016 Results

Haven’t seen stimulation of demand from Windows 10

“I would say that Windows 10, whilst I still believe it’s a tremendous operating system platform and universal apps and continuing computing make devices like the Elite x3 a reality, we have not yet seen the anticipated Windows 10 stimulation of demand that we would have hoped for, and we’re carefully monitoring any sort of price developments that could further weaken demand. ”

Campbell Soup (CPB) Denise M. Morrison on Q2 2016 Results

Weather had some impact

“Finally, weather is not something we control and it’s certainly not the main reason for the decline in our soup business, but we believe the unusually warm winter had a negative impact on the entire category in the first half. ”

Miscellaneous Earnings Call Notes 11.5.15

Colgate-Palmolive’s (CL) CEO Ian Cook on Q3 2015 Results

Have seen a decline in private label

“At the same time, we’ve seen a decline in private label shares in many of our categories indicating the consumers preference for branded products and respect of our equities.”

Anheuser-Busch InBev’s (BUD) CEO Carlos Brito on Q3 2015 Results

Big change in the Chinese economy towards consumption

“I think what’s happening in China at this point is that there is a big change from an economy that was all lead by exports and heavy investments in fixed assets, okay that generates a lot of blue-collar work or jobs to now an economy that’s much more service and domestic oriented economy. So more consumption, more consumer spending. So that of course, in the midst of this change, we see that in the Southeast, where some years ago there was lack of blue-collar workers and now there is too many of them. So there is a shift in there and I think that’s what the segments are showing us. But the segments that are more high priced are growing ahead of the ones that are lower price. And that’s exactly where we have most of our business and most of our brands position. So I think this change, while it may be bad for the industry, is not bad for us.”

PriceSmart’s (PSMT) CEO Jose Luis Laparte on Q4 2015 Results

We do have a soft economy in Columbia right now

“We do have a little bit of a soft economy right now, driven by the devaluation and other factors in the country. But we still are pretty optimistic about Columbia, and we haven’t reduced our efforts.”

Phillips 66’s (PSX) CEO Greg Garland on Q3 2015 Results

We see that the consumer side of China is doing very well

“we’re continuing to see good demand in Asia and across the system globally. So I think our view is demand is good. China is particular interest I think largely because of the reported numbers that what we see on both fuels and chemicals tells us that the consumer side of China is doing very well.””

By 2017/18 we’d expect not to be in a $50 crude environment any longer

“I mean our view consistently remains by 2017 and 2018 that really sort itself out and we are probably not $50 crude environment but we are probably not $100 but somewhere $60, $70, $80 in that range.”

Greenlight Capital Re’ (GLRE) CEO Bart Hedges on Q3 2015 Results

-16.9% through October

“The Greenlight Re investment portfolio lost 14.2% in the third quarter, bringing the year-to-date return to minus 16.9%.”

Brought next exposure up slightly during market sell off in August

“We reduced our gross exposure by 30 points in the quarter. Our net exposure increased slightly from 21% to 26% as we covered several shorts during the market sell-off in August. We continue to hold macro positions including gold, short Asian currencies and short French sovereign bonds. Overall, it’s been a challenging environment. We’re optimistic that we should get some recovery from our beaten down long portfolio.”

The Sherwin-Williams Company’s (SHW) CEO Chris Connor on Q3 2015 Results

Volume demand lagged initial expectations in virtually ever market we serve

“Volume demand lagged our initial expectations for the quarter in virtually every market we serve, but we remain focused on delivering positive results regardless of the demand environment.”

Continue to see deteriorating demand outside of NA

“We continue to see deteriorating demand for our product outside of North America.”

Banco Santander-Chile (BSAC) Q3 2015 Results

Economy has done better than most regional peers

“Segment [ph] in the corporate sectors continue to contract, but given the diversity of Chile’s economy and the fact that the average GDP growth of Chile’s main trading partners is relatively high, the economy has done better than other regional peers.”

No deterioration in asset quality

“In terms of evolution of asset quality, we think that the aligned trends are generally positive, especially in the consumer side, in the mortgage side and in the mid-size market. We haven’t seen any deterioration. ”

CBS (CBS) Leslie Moonves on Q3 2015 Results

Advertising is coming back in a big way

“advertising is coming back in a big way at CBS. Underlying network advertising was up 8% in the third quarter with strong growth in primetime, double-digit growth in sports and daytime and huge growth in late night, which was up 42%.’

The dire predictions of cord-cutting are overblown

“I think we’re all seeing that the dire predictions of cord-cutting are overblown, but the good news for CBS is, no matter where distribution goes, no matter how or where you want your content, we are in a perfect position. ”

There can never be too much content

“we are a content company, we believe the world can have more content, we don’t believe the guy who says oh, there’s too much content. There never can be too much content and we want more of it.”

Activision Blizzard (ATVI) Robert A. Kotick on Q3 2015 Results

Comparing King to Blizzard

“When we merged with Blizzard Entertainment, we found the right partner with extraordinary leadership. And when others dismissed the sustainability of Blizzard’s incredible capacity for innovation, we were certain patience would be rewarded. And it has. We see a lot of the same characteristics today in King. We think now is the right time to enter mobile gaming in a meaningful way. ”

Third Point Reinsurance’s (TPRE) CEO John Berger on Q3 2015 Results

Third Point owns Argentine debt

“Sovereign credit was up 3.1% on average exposure during the quarter, due to strength in Argentinean government debt the largest position in our credit portfolio. We’re looking forward to the run off Argentinean presidential election next month and we’ll be pleased with the victory from either candidate.’

Michael Kors Holdings (KORS) John D. Idol on Q2 2016 Results

Warm weather bad for seasonal items. Watch business still under pressure

“We saw accelerated growth in footwear, although the warm weather tempered boot sales in the quarter. The watch business continues to remain under pressure in retail and wholesale. ‘

Trend has been towards smaller handbags

” the idea that people are not buying handbags, I do not believe is a correct concept. They happen to be the fashion trend of smaller bags, so if we were selling x percent of $350, $400 and $500 handbags at this time last year we were selling less of those because we were selling a lot more in particular across bodies and large wallets. And that is what the consumer in particular the millennial is viewing as a fashion trend.’

All of us are now being impacted in parts of Texas because of oil prices

“all of us are now being impacted in parts of Texas because of oil prices there, that’s a little bit less tourist, but some of it’s related to the Mexicans shopping cross-border with the peso to the dollar.”

Time Warner (TWX) Jeff L. Bewkes on Q3 2015 Results

Programming is the most significant area of investment for the company

“Programming remains by far the most significant area of investment for the company. As you all know, we have plans to invest aggressively in content in 2016 and beyond.’

Stratasys (SSYS) David Reis on Q3 2015 Results

Excess capacity created by extraordinary expansion in 2014

“We also believe the situation has been worsened by the negative impact of excess capacity that followed the two-year period of extraordinary industry expansion that ended in 2014. Reflecting the low visibility of the current market environment, expected orders did not materialize as expected at the end of the quarter.’

Focused on adjusting the cost structure of the company to fit customer demand

“what I can tell is that we are taking very seriously the change in the business volume that we see in front of us and we are dealing with adjusting the cost structure of the company, the entire cost structure of the company not only MakerBot, to fit through what we see today in the market in terms of customer demand.”

Douglas Emmett’s (DEI) CEO Jordan Kaplan on Q3 2015 Results

Seems like occupancy is being driven by much stronger tenants

“I would say that, what’s driving — what’s going on here right now is a much stronger and wider base than what was driving the run up in ’04, ’05, ’06 and ’07. It’s way more comfortable, a way better percentage of kind of expenses for the tenants. The tenants are very — we’re seeing strong balance sheet and good credit. We’re seeing a good diversity of industries. You’re not seeing like a heavy lean on, I remember before, it was the mortgage — these mortgage guys were taking huge chunks of space”

“the strength in this market, all seems really healthy going to just literally more functional space for our tenants, as opposed to some of the tenants before that were literally just space grabbing and whether it be a big dotcom guy that didn’t exist a year ago and all of a sudden now needs 50,000 feet, 100,000 feet. What’s going on now seems a lot more comfortable and it’s backed by much stronger, more established tenants.”

Annaly Capital Management’s (NLY) CEO Kevin Keyes on Q3 2015 Results

Continued improvement in CRE fundamentals in the US

“The third quarter saw continued improved in U.S. commercial real estate fundamentals with healthy demand across all property types. Vacancy rates across all asset types declined compared to last quarter, with office and industrial continuing a trend of 22 consecutive quarters of positive demand.”

While the pace of CRE asset sales has slowed, we don’t see this as a weakening trend

“While the pace of sales has more recently begun to slow down 10% in September, we don’t see this as a weakening trend, as large take-private transactions continue to be announced with private equity taking advantage of the discount between listed markets and asset values.”

CMBS spreads have moved wider, but cap rates have not yet moved higher

“Spreads, however, have a continued widening that started this summer, with AAAs now at about 120 basis points, 32 basis points wider than at the beginning of the year and 34 basis points wider than this time last year. In addition, BBBs are almost 200 basis points wider than this time last year. While, this type of rate expansion is significant, we have not yet seen cap rates move higher. ”

Greenlight Re 1Q15 Earnings Call Notes

(Einhorn not on call)

Investment portfolio down 1.8% in 1Q

“Thanks Bart and good morning everyone. Greenlight Reinvestment portfolio was down 1.8% in the first quarter. At longs, led by Apple and SunEdison, outperform the market. Our shorts went against us by more than our longs gained and macro positions were slightly negative.”

New longs in AerCap, Chicago Bridge and Iron and General Motors

“We established a few new long positions in the quarter including AerCap, an Airline leasing company. Chicago Bridge and Iron, an energy — an engineering and construction firm that is down quite a bit along with the price of oil that has a significant multiyear backlog and we reestablished a position in General Motors. All three companies traded about eight times this year’s expected earnings.”

Only 16% Net exposure thanks to stretched valuations

“We also added several new shorts including shale oil frackers and increased our short exposure from 67% at December 31 to 88% as of March 31st. The investment portfolio’s net exposure was 16% at quarter end which is near an all-time low and reflects our concern about stretched valuations and challenges we see for corporate earnings in 2015. These challenges include the strong dollar, lower oil prices and difficult year-over-year comparisons in the next three quarters.”

Labor costs rising

“Another issue that has worried us and is less discussed is the commodity bust and its impact on peak margins. Labor hours are growing faster than GDP. Companies like Walmart and McDonalds are raising wages suggesting that the low end of labor market is tight.”

Earnings may shrink this year

“These issues lead us to believe that earnings have peaked and may even shrink this year. We are proceeding with caution and that also we aim to generate from the mix of long and shorts drive our results. Our current thinking is that 2015 is setting up to be a challenging environment and we are positioned accordingly.”

Greenlight Capital 4Q14 Earnings Call Notes

Each week I read dozens of transcripts from earnings calls and presentations as part of my investment process. Below are some of the most important quotes about the economy and industry trends from the transcripts that I read this week. Full notes can be found here.

Reinsurance market is highly competitive

“Good morning. Thank you for taking the time to join us today. The reinsurance market remain challenging during 2014, in general the market remains over capitalize in this highly competitive especially for new business.”

Underwriting results deteriorated due to adverse development

“Our 2014 underwriting results deteriorated primarily due to adverse reserve development on certainly commercial automobile and general liability contracts and run-off which I will describe more fully in a momen”

Reasons for deterioration

“Reserve deterioration for commercial automobile relates to one contract where we’ve appointed a new claims handler who reviewed all the claims in the portfolio and were actively close claims reducing the count by over 60%. The adverse development on general liability reserves relates to a contract that has suffered a large number of asserted claims for construction defects by small contractors, majority of these claims close without any indemnity payment and majority of the adverse development relate to claims handling costs.”

Property catastrophe is the most competitive area of the business

” Our property catastrophe retro accounts continue to benefit from the light year from catastrophe. However, this was the most competitive area in the market due to influx of alternative capital and the recent history of years without a major loss.”

Greenlight did 8.7% last year

“The Greenlight Reinvestment portfolio returned 5.3% in the fourth quarter, bringing the 2014 full year return to 8.7%”

exited oil positions mid year

“In the fourth quarter we exited our energy positions in Anadarko BP, Mcdermott and National Oilwell Varco. We hedged our underlying exposure to oil mid-year by shorting crude oil futures. This protected us from the sharp falloff in oil prices.”

Ended the year with 39% net exposure

“We ended the year conservatively position with 39% net exposure which is 15% less net long than a year ago. The positives we see in 2015 include falling unemployment, lower oil and other commodity prices that should boost consumer spending in the short term. And the first quarter will be an easy comparison for corporate earnings given last year’s first quarter was negatively affected by harsh weather. The negatives we see include stretched valuations and earnings headwinds later this year including the strong dollar which reduces the translated earnings of foreign subsidiaries.”

Macro concerns

“From a macro perspective we are worried that emergency policies are now falling. We continue to maintain our macro overlay with positions in gold short Japanese yen and Chinese RMB and short French sovereign debt.”

Greenlight Capital Re 3Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Greenlight lost 3.7% in 3Q

“The Greenlight Re investment portfolio loss 3.7% in the third quarter which brings the 2014 net return to 3.2%. It was a frustrating quarter as a lack of winners combined with a normal amount of individual losers led the losses from our long, short and macro positions. Nothing terrible happened, but we just got ground down gradually. In such circumstances, it is not obvious what to do other than stay the course and be patient.’

Thoughts on Apple, Oil States and US Steel

“Apple, which still trades well below our market multiple was our only notable contributor for the quarter as it start price began to reflect the strength of its iOS platform and the enthusiasm for new phones and services. The gain in Apple was roughly offset by a loss in our long position in Civeo, the accommodations business spun off from Oil States International. The stock sold off and management surprised the market with the substantial operating short fall and a decision to not move forward with the re-conversion. We disagree with the company’s actions and believe the company should be levered real estate entity that distributes most of its cash flows.

On the short side, US Steel temporarily benefited from panic ordering due to a shortage of raw materials which led to a spike in hot rolled steel prices. Given the new record spread between domestic steel prices and foreign steel prices, we believe that imports will arrive shortly, steel prices will retrace and the US Steel’s great third quarter will likely be the best result it reports for a long time.”

They were up 2.1% in October though

“We ended the quarter 40% net long which is our lowest net exposure so far this year at any month end. We were well positioned to be opportunistic in a dislocation in early October which was the first real dislocation we’ve seen in a long time. We added to our net long exposure during the correction, which unfortunately was brief. We returned 2.1% in October.’

Greenlight Capital Re 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Einhorn up 7.3% so far through June

” The Greenlight Re investment portfolio returned 8.1% in the second quarter bringing the 2014 net return to 7.3%.”

Cautiously positioned

“The investment portfolio ended the quarter 48% net long which is down about 4% from the beginning of the quarter. As the market continues to rise from the face of conflicting economic data, global unrest and looming overdue Fed exit from quantitative easing we remain cautiously positioned. ”

2.6% decline in July

“In the month of July our investment portfolio lost 2.6%. Despite a positive results from Apple we had a large number of small losses throughout the rest of the portfolio that summed up to a losing month. None of the losses were large and the real problem was a lack of other significant winners.”

Greenlight Capital Re

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.


“The Greenlight Re investment portfolio returned 6.6% in the fourth quarter and 19.6% in 2013. During the quarter our longs outperformed the S&P 500, our shorts went up less than the market and macro-positions led by Yen, were a slight contributor. This is also the case for the full year as we generated alpha in both our long and short portfolios and had gains in our macro-positions. During the quarter the largest contributors to our results were long positions in Apple, Marvell and Micron Technologies.

The biggest detractors were short positions in Chipotle and U.S. Steel. Our portfolio performed well in the melt-up environment in 2013 as investors priced in lower unemployment and improved home prices. A number of new long positions contributed to our performance. We also avoided getting hurt too badly in our short portfolio by having minimal exposure to the most speculative stocks many of which appeared to have completely disconnected from normal valuation methods.

We established a position in Micron in the second half of the year, we believe the company can earn $4 per share in the Calendar year 2014 and it is well positioned to benefit from favorable dynamics from consolidated in the DRAM and Flash memory industries. We also added two energy long positions during the quarter, Anadarko Petroleum and British Petroleum. The market ended the year on a strong note after a huge move that was supported mostly by multiple expansion as earnings growth was lack luster. In 2013 the market rewarded many companies repeating [ph] earnings after they had lower guidance. This trend is not likely to continue indefinitely.

During the month of January our net exposure decreased about 10 points to 45% as we reduced our exposure on both long and short size. We continue to hold macro positions in gold throughout the end and in short sovereign debt. Our goal in 2014 remains to protect capital in an uncertain environment and define investment opportunities that will generate alpha on both our long and short portfolios. 2013 was a good year for Greenlight Re. We had decent results on both our underwriting and investment activities and solid growth in fully diluted book value per share. We believe we can be better on both sides of our dual engine strategy but are pleased with how the past year has shown our business strategy at work.”