David Einhorn is getting killed by his ‘bubble basket’ short bets against Tesla, Amazon

David A. Grogan | On Events

David

Billionaire hedge fund manager David Einhorn, who is known for his prescient short bets against stocks like Lehman Brothers, is not happy high-flying cult stocks are crushing the market this year.

The investor told his clients he is "frustrated" with the performance of his bets against technology companies such as Tesla and Amazon, which he calls the "bubble basket."

Einhorn's Greenlight Capital was down 4 percent in the second quarter, bringing its performance for 2017 through June to negative 2.8 percent, according to an investor letter. In comparison the S&P 500 rose 8.2 percent in the first half of this year.

"The second quarter was a bit of a head-scratcher. Our five biggest longs reported earnings that met or exceeded expectations, while our shorts announced earnings that mostly disappointed. Nonetheless, we lost money in the quarter," Einhorn wrote in the investor letter Friday. "The bubble basket was particularly frustrating."

Tesla and Amazon shares are up 53 percent and 34 percent this year respectively, compared to the S&P 500's 10 percent return through Friday. In the second quarter, Tesla rose 30 percent, while Amazon rallied 9 percent.

The hedge fund manager is skeptical over Amazon's $13.7 billion acquisition announcement for Whole Foods Market. He cited how the internet giant is buying brick and mortar physical stores of "mostly leased" retail space for over $800 per square foot.

"When companies announce large acquisitions, they typically explain the implications and strategy. AMZN has said nothing and left the interpretation to the market's imagination, which for the time being skews optimistic," Einhorn wrote.

The hedge fund manager also explained why a key popular bull thesis for Telsa doesn't make any sense.

"TSLA bulls look at Elon Musk, think of the Steve Jobs, and decide TSLA is the next Apple. We have read many critiques of TSLA and we won't repeat them here, but we will offer a few distinctions from Apple," he wrote.

Einhorn said when Apple released the first iPhone it was "immediately profitable" unlike Tesla. In addition, he cited how the smart phone maker's customers buy into the firm's product ecosystem. Apple's products have a "network effect" as more users leads to more applications, according to the manager.

"TSLA is unlikely to sustain a competitive advantage by having a network of charging stations or by accumulating driver data," he added. "Competition was very slow to develop for Apple … By contrast, every major car company in the world intends to compete with TSLA in electric vehicles."

Tesla CEO Elon Musk isn't above making fun of company's skeptics. In April he taunted short sellers on Twitter.

However, Musk did admit the Tesla's current stock price "is higher than we have the right to deserve" at the National Governors Association meeting on Saturday.

Greenlight Capital declined to comment on this story. Tesla and Amazon did not immediately respond to requests for comment.

— Eyes On Events's Scott Wapner contributed to this story.

CNBC

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