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Jacob Wolinsky
Jacob Wolinsky
Articles  | Author's Website |

Fooling Some of the People All of the Time, A Long Short by David Einhorn

February 19, 2011 | About:

About the author:

Jacob Wolinsky
My investment ideas have been inspired by many of value investors including Benjamin Graham, Charles Royce, John Neff, Joel Greenblatt, Peter Lynch, Seth Klarman,Martin Whitman and Bruce Greenwald. .I live with my wife and daughter in Monsey, NY. I can be contacted jacobwolinsky(AT)gmail.com and my blog is www.valuewalk.com

Visit Jacob Wolinsky's Website


Rating: 3.4/5 (24 votes)

Comments

paulwitt
Paulwitt - 6 years ago    Report SPAM
The story has a happy ending for Einhorn. In the updated version, Allied declared bankruptcy on September 30th 2008, and was bought out in 2010 by Ares Capital.

Yes. Ares Capital did buy out Allied Capital, but Allied Capital didn't declare bankruptcy. It was one of Allied Capital's portfolio companies that declared bankruptcy.

BTW, I hear David Einhorn is a good poker player. Myself, I never enjoyed the game. I prefer playing blackjack!

yswolinsky
Yswolinsky - 6 years ago    Report SPAM
Sorry, thanks for pointing that out, it was a brief point in the book I missed it. It has been fixed. BTW einhorn is a great holdem player not surprised though.
Alex Morris
Alex Morris - 6 years ago    Report SPAM
Just received the book from Amazon, excited to read it!
yswolinsky
Yswolinsky - 6 years ago    Report SPAM
“Got your book on Friday, finished it on Sunday. To me, like reading porn.”-Steve Eisman
the Spark
The Spark - 6 years ago    Report SPAM


One thing never clear to me was how successful a short Allied was. Most of the time Einhorn was short the stock it carried a huge dividend. Absent a lot of leverage, I am not sure Greenlight made a huge killing in the stock considering how many years it took to play out while Allied continued to pay its hefty dividend. I think the return was good, but not extraordinary. I could be wrong. Has anyone ever seen the annualized return from Einhorn's short? The book is a good story, though I felt it could have been told with a little less detail.
paulwitt
Paulwitt - 6 years ago    Report SPAM
Yes, the dividends were hefty and increasing every year. Over 40 years ALD had a return of something like 18% annualized. In fact, Peter Lynch owned the stock and wrote about it in his book "Beating the Street".

So when I first bought ALD it was around $20 and paying 10% dividends. In the great recession it went down to 80 cents and I bought more and sold out at $4.00 when ARCC bought them out.

My whole thesis during the crisis is that when a stock goes down 90%, shorts can make 90%. But if the stock recovers to the original price, longs make 900%. I chose the latter!

And when the majority of stocks go to fair value I hope to buy some more BDC stocks!

paulwitt
Paulwitt - 6 years ago    Report SPAM
Here's my current "FORD, the last carmaker standing in America speculation play". You know, the one where F went from $1.00 to $15.63 in a couple of years (or, in Peter Lynch's book referred to as cyclicals".)

Here it is: Bank of Ireland (IRE) and Allied Irish Banks (AIB), the #1 and #2 banks in Ireland. What are the odds the #1 bank will be ok? And the #2?

So take $2,000 and buy $1,000 of each. It's better than a lottery ticket!

yswolinsky
Yswolinsky - 5 years ago    Report SPAM
To see how much profit he made I guess you would have to take his profit, which I believe he stated was 35m and divide it by his average investment in the company 2002-2008, then you would have to subtract dividends. If you want to calculate taxes I guess you would take 35 or 40% rate. If you wanted to calculate opportunity cost you would have to discount it by a rate, which in Einhorn's case should be very high since he has returned 30% annually.

Let me know if anyone thinks this makes sense and/or how much money he made sense.
kldd16
Kldd16 - 4 years ago    Report SPAM
Regarding Allied performance since Einhorn's speech:

On page 356, Einhorn claims:

From April 30, 2002, through December 31, 2007, Allied returned 5.9 percent per year including tax distributions

Either Einhorn didn't have much capital in it, or he entered and exited several times.

He claims that: Greenlight’s overall performance was 17.7 percent per year during that same period.

I don't think there's a ticker for Einhorn's fund and yahoo doesn't return the old data on ALD.

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