Knowing when to change an investment thesis on a particular asset or company is a major obstacle for individuals. Investors often only seek out opinions that confirm their own views instead of challenging them. It may feel good to surround yourself with analysts, commentators, and other people that agree with you, but this confirmation bias is hazardous to your money. One popular hedge fund manager reminds market participants that when conditions change so should your thesis.
David Einhorn, president and founder of Greenlight Capital, recently issued his latest quarterly letter to investors. The hedge fund superstar notes that his funds have averaged 19.5 percent on an annualized basis since May 1996, and his long positions in the fourth quarter modestly outperformed the broad market. He also announced a new position in a familiar name.
In the fourth-quarter, Einhorn added several new long ideas to his holdings, including a new “large position” in Micron Technology (NASDAQ:MU), a global leader in semiconductor memory chips, such as DRAM and NAND Flash. Interestingly, this is not the first time that Einhorn has been involved with Micron Technology.