If you are looking for a job in hedge funds, you need to know about David Einhorn, one of the more colorful personalities in the hedge fund world. Einhorn, as you may know, was among the handful of hedge fund managers profiled in the book, The Big Short, who saw signs of the impending subprime collapse well in advance. He had the courage to bet big on his convictions, and profited from it, though not without painful resistance from some of his investors. Einhorn is also somewhat notorious for his public speaking, where he does not mince words and is known for upsetting the status quo.
Einhorn is president of Greenlight Capital, a long-short value-oriented hedge fund, which he founded in 1996. It currently has over $7 billion under management and is closed to new investors. His fund has generated 30% annual returns for investors since its inception, according to an article in GuruFocus.
Einhorn recently spoke at a UJA event and among other topics, revealed his favorite investment books. Among them:
Margin of Safety, by Seth Klarman. This book is one of the most difficult books on finance to track down. Published in 1991, it is now out of print, and sells on Amazon and eBay for well over $1000. Seth Klarman is the portfolio manager of The Baupost Group, according to a review on Amazon, and a very successful practitioner of the value investing strategy. In his book, he sets out to educate the reader on this concept, stressing the advantages of his risk-averse approach. According to GuruFocus, Seth Klarman was also named by Warren Buffet as one of Buffet’s top three favorite investors.
The second of Einhorn’s picks was Joel Greenblatt’s You Can Be a Stock Market Genius. Far more affordable at roughly $10 on Amazon, Greenblatt’s book focuses on investing in special situations that are usually beyond the scope of the average investor. These include spin-offs, mergers, risk arbitrage, restructurings, rights offerings, bankruptcies, liquidations, and asset sales.
Einhorn also recommends Michael Lewis’s Liar’s Poker, a highly entertaining look at the rise and the fall of Salomon Brothers. It also goes into depth on junk bonds and the fraud of junk bond king, Michael Milken.
Einhorn’s own book, Fooling Some of the People All of the Time: A Long Short Story, has just been re-released in an updated version. In it, Einhorn describes his battle with Allied Capital and alleged fraudulent practices at the firm.
What are you favorite investment books? Which would be most useful to someone looking to get a job in hedge funds? Add your comments below.