Greenlight Capital’s David Einhorn said he’s getting concerned about the stock market after a strong rally and has added sizable downside protection to his portfolio. The star manager revealed in a letter to shareholders obtained by CNBC that his hedge fund returned 14.5% in the second quarter, compared with an 8.7% return for the S & P 500. The biggest winner in his portfolio has been homebuilder Green Brick Partners , which saw shares rally 62% last quarter and 117% this year. Einhorn said after a stellar first half of the year, he added “substantial portfolio protection through index hedges” late in the second quarter as he grew more bearish on the market. Between January and June, the S & P 500 popped 15.9% for its best first half since 2019. The tech-heavy Nasdaq Composite surged 31.7%, its strongest first half since 1983. “If we were ‘bearish’ until March and ‘neutral’ through June, we would now characterize ourselves as ‘worried,'” Einhorn said in the letter. “When the authorities bailed out bank depositors in March, we thought the implications were bullish for both stocks and inflation, and adjusted the portfolio accordingly.” Einhorn is not the only person getting cautious on Wall Street. A regulatory filing Monday just showed that Michael Burry , known for calling the subprime mortgage crisis, held potential massive bets against the stock market via put options against the SPDR S & P 500 ETF Trust and the Invesco QQQ ETF . Einhorn, 54, believes inflation remains a big risk even though data has suggested easing price pressures. The consumer price index rose 3.2% from a year ago in July, slightly below expectations and coming well off the 40-year highs seen in mid-2022. “The inflation bullishness has not yet materialized. Recent inflation readings have shown a noted deceleration and the tailwind from higher rents is likely to dissipate, causing core inflation to fall further,” Einhorn said. “Even so, we believe inflation is stickier and more entrenched than the market is currently appraising.” Einhorn, a value-oriented hedge fund manager, found success in recent years pivoting to short selling and buying companies with big buyback programs. He also revealed that he added a small position in NET Power , a clean energy company that went public in June via a SPAC. Einhorn said he’s particularly bullish on carbon capture. “NPWR is in the early stages of its commercial deployment and if it doesn’t work out, the downside is more than we would…
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