MW Einhorn says the market is at the fartcoin stage of the cycle. His fund bought Peloton and made these moves.

By Barbara Kollmeyer

Greenlight Capital hedge fund says it's mostly avoiding tech stocks

Tech is set to fuel Wednesday's Wall Street gains, thanks to Stargate AI buzz and Netflix's heady results.

Not everyone is a Big Tech superfan. Take Greenlight Capital, the hedge fund founded and presided by David Einhorn, that had "limited exposure to either side of the book" to those drivers of the S&P 500's 25% return last year, according to a just-released fourth-quarter letter. Greenlight's funds returned just over 7% last year.

"We continue to be concerned about the overall valuation of the market and have maintained a lower-than-average net market exposure...Cyclically and interest rate adjusted valuations are as high as we can remember," said Greenlight.

The firm says prior favorite Apple $(AAPL)$ has seen no revenue growth in the last couple of years, yet its price/earnings multiple jumped to 37 times from 22. The hedge fund sees no reason why that should go higher "or what the investment appeal is at this valuation."

As for what the firm does like, Greenlight took a new position in fitness group Peloton $(PTON)$ in the latter half of last year. The company has "maintained a loyal and engaged customer base through its subscription-based business model," and it's banking on cost-cutting plans, which if successful, could mean "significant upside" for the stock.

It took a medium-sized position in agricultural equipment maker CNH Industrial $(CNH)$, which has been dogged by an industry downturn, and see sales returning to growth sometime this year.

Greenlight took a smaller position in managed Medicaid giant Centene $(CNC)$, whose shares are trading at a historical low. In short, feared headwinds from the Trump administration may not materialize and could be more than offset by a repricing of its core Medicaid business, says the hedge fund.

Greenlight took a "moderate loss" in Capri Holdings $(CPRI)$ after the luxury fashion group's sale to Coach owner Tapestry $(TPR)$ was blocked. Still, it added to that position saying Capri's "terrible" interim results were probably due to management distraction, and it sees "strategic potential" for its Versace and Jimmy Choo brands.

Expectations for the end of Ukraine War saw the fund sell defense-related ETFs. It sold workplace and technology solutions group ODP $(ODP)$ due to a deteriorating competitive position, and Tenet Healthcare $(THC)$, on concerns the multinational healthcare services group may fare less well under Trump.

The shareholder letter spends a fair amount of space criticizing the crypto space, adding that we may be in "the fartcoin stage of the market cycle." That's in reference to the memecoin created last year that surged to over a $1 billion in market value. The firm says it serves no purpose besides trading and speculation.

Greenlight says nothing will stop more tradable coins being launched after President Donald Trump and Melania's memecoins recently busted onto the crypto scene. "It's anyone's guess as to what will happen next, but it feels like it's going to be wild," says Greenlight.

But don't count on a strategic U.S. bitcoin reserve. "More likely, cooler heads will decide that the government should not borrow another trillion dollars in the bond market to speculate in bitcoin and that there is, in fact, nothing strategic about doing so," says the fund.

Read: Trump disappoints crypto holders hoping for immediate policy changes. Here's what that's doing to bitcoin.

Its crypto play? Short positions in levered single-stock ETFs MSTU MSTU and MSTX MSTX - "destined to fail" due to high financing costs - partially offset by owning MicroStrategy $(MSTR.AU)$, the bitcoin buyer and holder those funds track bitcoin. That play was a "material winner in the quarter."

Read: 20 value stocks primed for rapid revenue growth

The markets

Nasdaq-100 futures (NQ00) are leading the way higher for stocks (ES00) (YM00), while Treasury yields BX:TMUBMUSD10Y are steady.

   Key asset performance                                                Last       5d      1m      YTD    1y 
   S&P 500                                                              6049.24    1.67%   0.15%   2.85%  24.25% 
   Nasdaq Composite                                                     19,756.78  3.50%   -0.04%  2.31%  28.62% 
   10-year Treasury                                                     4.573      -8.40   -1.60   -0.30  39.20 
   Gold                                                                 2771.9     1.81%   5.26%   5.02%  37.60% 
   Oil                                                                  76.31      -3.60%  8.75%   6.18%  1.26% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor's Business Daily.

The buzz

Nvidia $(NVDA)$ and Oracle $(ORCL)$ shares are higher after the $100 billion AI infrastructure announcement made with President Donald Trump. Trump said the U.S. may hit China with 10% tariffs by Feb. 1. Here's a look at another key date for tariffs.

Netflix shares $(NFLX)$ are up 15% after the streaming provider's huge subscriber beat. It's also raising prices.

Johnson & Johnson $(JNJ)$ beat forecasts as Travelers Cos. $(TRV)$, Halliburton $(HAL)$, Procter & Gamble $(PG)$ and Abbott Labs $(ABT)$ report results.

United Airlines stock $(UAL)$ is rallying after record traveler numbers drove a strong quarter.

Leading indicators are due at 10 a.m.

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The chart

Kevin Muir, a former trader who writes the Macro Tourist blog, flagged this chart from Bank of America's latest global fund manager survey, showing 26% of those surveyed expect above-trend growth and inflation, for the next 12 months, the highest level since April 2022. "Ignore the obvious post-COVID euphoria, and focus on the series without that anomaly. We are at previous highs. Folks are foaming-at-the-mouth bullish."

Top tickers

These were the top-searched tickers on MarketWatch as of 6 a.m.:

   Ticker  Security name 
   NVDA    Nvidia 
   TSLA    Tesla 
   NFLX    Netflix 
   GME     GameStop 
   AAPL    Apple 
   PLTR    Palantir 
   TSM     Taiwan Semiconductor Manufacturing 
   RGTI    Rigetti Computing 
   ORCL    Oracle 
   MSTR    MicroStrategy 

Random reads

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-Barbara Kollmeyer

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January 22, 2025 07:01 ET (12:01 GMT)

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