How Einhorn Does It

David Einhorn has become one of the most closely followed hedge fund managers in the world. And in a recent interview with Bloomberg, Columbia Business School Professor Fabio Savoldelli examines what makes Einhorn so successful. Savoldelli says Einhorn (who he says has produced 20% compound annualized returns since 1996) has an “incredibly disciplined” process. He does not act in an index-relative manner as many managers do, but instead analyzes every position as to whether it will make him money. Savoldelli says Einhorn examines the economics of a business, and wants to see that earnings are consistent with those economics; that management is aligned with shareholders; and that management is executing along the lines it said it would. He adds that Einhorn is consistently net long, and says the depth of Einhorn’s analysis and the fact that he is a “totally independent thinker” — something that is very hard to be on Wall Street — are responsible for his success.