Greenlight Capital put its money-losing first quarter behind it in the second, no thanks to its short book.
The New York hedge fund returned 7.9% from April to June, erasing its first-quarter loss and leaving it up 6.4% this year, the firm told investors. Greenlight credited its investments in Apple Inc. and Micron Technology for the gains.
The hedge fund said that its short bet against Questcor Pharmaceuticals was the “only significant” negative in its portfolio—and it was significant indeed, with the company’s shares surging 42% after Mallinckrodt announced plans to buy the company.
“Takeover season has returned and in a new twist, the buyers’ stock prices are also advancing in response to announced deals, enabling companies, including some of our shorts, to see gains as acquirers—even of other troubled companies,” Greenlight wrote.
The hedge fund accused Mallinckrodt of “blowing smoke” over Questcor’s problems, and said that the buyer would become an attractive short itself should the deal go through.
Greenlight said it was also shorting grocery chain Safeway and Martin Marietta Materials, while adding a long bet on semiconductor company Lam Research Corp.