In Bet Against Green Mountain, Einhorn Suffers a Loss

One of David Einhorn’s highest-profile bets has turned against him.

Mr. Einhorn, the hedge fund manager who runs Greenlight Capital, had a setback in his short-selling position in Green Mountain Coffee Roasters, as the stock rose during the fourth quarter, he said Tuesday in a letter to investors. The stock’s 74 percent climb wiped out the position’s 2012 profits, Mr. Einhorn said.

It was a rough three months for Greenlight over all, as a 4.9 percent loss during the quarter pared the yearly performance down to a gain of 7.9 percent. Still, Mr. Einhorn said, the firm is largely sticking with its strategy.

“While it is hard to view our performance last year as a catastrophe, it nonetheless falls short of our goals,” Mr. Einhorn wrote. “We think that we should have had a much better performance in this kind ofinvesting climate, and we headed into the fourth quarter on track to do so.”

Another notable stumble for Mr. Einhorn was his firm’s long position in Apple, which lost its third-quarter gains at the end of the year. Greenlight’s stake in Marvell Technology was the “biggest loser” of 2012, with the shares falling to $7.26 from $13.85, Mr. Einhorn said.

Still, Marvell, which was handed an unfavorable jury verdict last year, continues to be attractive, Mr. Einhorn said. That persistence appeared to pay off Wednesday afternoon, with Marvell’s shares rising more than 4 percent as investors digested Greenlight’s letter.

The hedge fund manager announced a new bearish stance on the iron ore sector, saying Greenlight was betting against a number of stocks. “After a decade-long bull market, supply is now exceeding demand,” Mr. Einhorn wrote.

But that thesis wasn’t borne out in the fourth quarter, as the stocks in question rallied.

“Our coffee was too hot, our ! apple was bruised and our iron supplements didn’t go down smoothly,” Mr. Einhorn wrote.

The short position in Green Mountain initially appeared to be a winner, when Mr. Einhorn questioned the company’s accounting in 2011. He reiterated those arguments in a presentation last October.

But Green Mountain’s stock began to recover at the end of 2012, as the company reported robust quarterly results.