Greenlight Capital’s Q1 2025 Triumph: How David Einhorn’s Bets on Inflation and These 3 Stocks Crushed the Market

In the first quarter of 2025, David Einhorn’s Greenlight Capital delivered an 8.2% return, a stark contrast to the S&P 500’s 4.3% decline. The firm’s success was built on a mix of macroeconomic bets and strategic stock picks. Here are the three stocks that powered the outperformance—and the bigger picture behind them.

The Top 3 Holdings Driving Greenlight’s Q1 Win

1. Brighthouse Financial (BHF)
   Greenlight’s largest equity holding, Brighthouse Financial, surged 20.7% in Q1 after the insurance firm announced a potential sale process involving Goldman Sachs and Wells Fargo. The company’s $120 billion general account—a stable source of income—also attracted investor interest.

This position exemplified Einhorn’s focus on companies with strong balance sheets and catalyst-driven opportunities.

1. Core Natural Resources (CNR)
   Despite falling 27.6% in the quarter due to coal price declines and operational challenges, Core Natural Resources remained a top holding. The firm’s exposure here reflected a bet on sector-specific rebounds and the broader energy landscape.

While painful in the short term, this holding underscored Greenlight’s long-term, contrarian approach to resource equities.

1. Green Brick Partners (GRBK)
   A construction and real estate services firm, GRBK saw its shares rise 15% in Q1, outperforming a housing market plagued by rising interest rates. Greenlight’s 11 million-share stake (now reduced by 7% from prior quarters) highlighted confidence in GRBK’s execution amid a challenging environment.
   

The Macro Play: Gold, Inflation, and Tail Risks

While these stocks were critical, the real star was gold. The firm’s physical bullion and call options gained 19% in Q1, making it the portfolio’s “single biggest winner.” This was no coincidence:
- Policy-Driven Inflation: Einhorn argued that Trump administration policies—such as tariffs, government job cuts, and trade wars—would fuel inflation.
- Defensive Posture: Greenlight added long-duration inflation swaps and SOFR futures to capitalize on Fed rate cuts and rising price pressures.
- Tail Protection: Positions hedging against a sharp dollar decline (vs. the euro/yen) reflected fears of currency volatility in a politically charged environment.

Why This Matters: Bear Markets and Partisan Divides

Einhorn’s letter painted a grim but instructive picture of the market:
- Bear Market Inception: The S&P’s 4.3% decline was just the start, Einhorn warned. Bear markets often feature “rip-your-face-off” rallies driven by headlines, but the underlying trend is downward. Greenlight reduced net equity exposure to 86% long/67% short, prioritizing downside protection.
- Partisan Economic Sentiment: Democrats’ consumer spending weakened due to federal job cuts in sectors like climate research and DEI initiatives, while Republicans remained optimistic. This divide, Einhorn argued, would prolong the slowdown.
- Policy Chaos: Trade wars and “America First” policies disrupted global supply chains, creating opportunities in inflation hedges and shorts on politically vulnerable companies.

Conclusion: A Contrarian’s Blueprint

Greenlight’s Q1 success wasn’t accidental. By combining macro bets (gold, inflation swaps) with equity picks in resilient sectors (BHF, GRBK), the firm outperformed while shielding against volatility. Key data points:
- Performance: 8.2% return vs. the S&P’s -4.3% and hedge fund average of -0.4%.
- Strategy Payoff: Gold’s 19% gain and short positions targeting “liberal” companies offset equity declines.
- Long-Term Focus: The portfolio’s top 10 holdings had been held for an average of 8.05 quarters, emphasizing conviction over short-term swings.

Einhorn’s warning that the U.S. is in the “early innings of a bear market” suggests this strategy isn’t a flash in the pan. As policy uncertainty and inflation risks persist, Greenlight’s mix of hedges, contrarian stocks, and macro bets could keep it ahead of the pack—even as others struggle.

The takeaway? In a market where policy drives outcomes, betting on inflation, picking undervalued equities, and hedging like a pessimist isn’t just prudent—it’s profitable.