Investing.com — David Einhorn, the founder of Greenlight Capital, issued a cautionary note to investors on Wednesday, highlighting information from Warren Buffett’s recent stock sales.
In his Q3 2024 letter to partners, Einhorn pointed out that while Buffett is renowned for his long-term investment prowess, his current actions could signal a change in market conditions.
Einhorn noted that Greenlight Capital’s funds returned just 1.1% in the third quarter, falling short of a 5.9% gain.
Despite the quiet period for the company, Einhorn expressed concern about the current state of the market, stating, “the market is not just hitting all-time highs. It is, by many measures, the most expensive stock market we’ve seen since establishment of Greenlight’.
He recalled Buffett’s historic market-timing skills, citing how Oracle (NYSE: ) of Omaha previously exited the market during boom times and repositioned itself during downturns.
Einhorn stated: “One could argue that sitting out bear markets was the underrated reason for [Buffett’s] excellent long-term returns.”
Einhorn stressed that Buffett’s recent stock sales and cash hoarding are not immediate signs of market timing, but reflect a broader, longer-term perspective.
“These stock sales are more likely to express a long-term view that right now is not a good time to have a large exposure to stocks,” he explained.
Einhorn’s analysis aligns with concerns about the current market environment, where low dividend yields and high price-to-earnings ratios suggest potential headwinds.
“We would refrain from calling this market a bubble and simply note that the dividend yield is low and the P/E ratio is elevated despite corporate earnings that are cyclically high, if not at the top of the cycle,” Einhorn said, adding that ” The opportunity set is expected to be better at some point in the not-too-distant future.”
