I don’t often cover individual stocks, but I’ll make an exception for this company. Greenlight Re (GLRE) is a very interesting company. I’m not recommending it and I do not own any GLRE, but I do think it is worth a look, particularly if you are adventurous.
Greenlight Re is not a mutual fund nor is it an ETF. Instead, it has some similarities — but differences too — with Berkshire Hathaway (BRKB), Warren Buffett’s company.
One similarity is that Greenlight Re is an insurance company as is Berkshire. Greenlight Re is also led by an astute investment pro, David Einhorn. Einhorn is a hedge fund manager and a contrarian who correctly foresaw the fatal weaknesses in Lehman Brothers and other financial companies. Just as Berkshire is a way to piggyback on the investment skills of Warren Buffett, Greenlight functions in a similar fashion as a way to access Einhorn’s strategies.
The differences are significant too. Berkshire has a very long and incredibly good track record going back decades. Greenlight has a very short record, dating back only to 2007. Berkshire is headquartered in the U.S. , but Greenlight is based in the Cayman Islands. I personally am nervous about offshore companies, but I’ll leave that for the moment.
Einhorn is probably best known for public stances he took on Lehman Brothers and Allied Capital. He shorted both companies because he believed they were wildly overvalued. He was correct.
Here is a description of the company from it’s very modest web site [emphasis added]:
Greenlight Reinsurance Ltd. is an AM Best “A-” (Excellent) rated specialist property and casualty reinsurance company based in the Cayman Islands. The Company provides a variety of custom-tailored reinsurance solutions to the insurance, risk retention group, captive and financial marketplaces. Established in 2004, Greenlight Re selectively offers customized reinsurance solutions in markets where capacity and alternatives are limited. With a focus on deriving superior returns from both sides of the balance sheet, Greenlight Re’s assets are managed according to a value-oriented equity-focused strategy that complements the Company’s business goal of long-term growth in book value per share.
Here is a short piece on GLRE from Gurufocus.com:
…You can invest with David Einhorn by owning stock in Greenlight Capital Re Ltd. Einhorn is the Chairman of GLRE and owns 17.4% of the shares outstanding. However, as a caveat, he owns super voting B shares which carry 10 votes for each share so this is really his baby.
GLRE is a specialty property and casualty reinsurer based in the Cayman Islands which affords it tax-free status. David Einhorn has created GLRE as a vehicle to raise funds to invest primarily in equities or debt of other companies.
…While most insurance companies generally invest in conservative fixed income securities GLRE throught DME Advisors, which I will discuss shortly, will employ more aggressive strategies including long and short sales, derivatives and options to enhance returns…
I’ve been reading speeches he has given and here is an excerpt from a speech Einhorn gave this October at the Value Investing Conference. It gives you a sense of how his thinking about investing and big picture market strategies has evolved [emphasis added]:
…The lesson that I have learned is that it isn't reasonable to be agnostic about the big picture. For years I had believed that I didn't need to take a view on the market or the economy because I considered myself to be a "bottom up" investor. Having my eyes open to the big picture doesn't mean abandoning stock picking, but it does mean managing the long short exposure ratio more actively, worrying about what may be brewing in certain industries, and when appropriate, buying some just-in-case insurance for foreseeable macro risks even if they are hard to time…
As you can tell, I’m intrigued with this company and I’m sure I’ll be looking into it further. Stay tuned.
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Kurt, I would have a new picture taken. You look disturbingly like a certain Madoff in your current picture.
Kurt — Congratulations on the new home. I’ve been a faithful reader of the old site and always wondered why you didn’t have a higher profile. I’m looking forward to reading your columns here.
Kurt Brouwer is a fee-only financial advisor with three decades of experience. He is the chairman and co-founder of Brouwer & Janachowski, LLC. Kurt has written books, articles and hundreds of blog posts on mutual funds, ETFs and other investment topics. E-mail: kurt.brouwer *at* gmail.com.
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