At just 42, hedge-fund whiz kid David Einhorn has made a big name for himself and an even bigger fortune on Wall Street by shorting overvalued stocks (as he famously did with Lehman Brothers in 2008), and buying undervalued ones.
This strategy has him now managing a $7.8 billion hedge fund, Greenlight Capital, that boasts a 15-year annual rate of return of nearly 19 percent. Not a bad batting average with runners in scoring position.
So why is Einhorn willing to put $200 million of his own money into the New York Mets, a team some weary and disappointed fans may compare to the once-mighty Lehman?
Sure, there is the promise of the best seats at Citi Field and the cachet that being “Mr. Met” will bring to Einhorn and his three children on the Rye, NY ball fields, where he manages a Little League team. The investment definitely comes with a boatload of bragging rights.
Einhorn does little to dismiss this notion. Late this week, as news of his intended investment in the franchise grabbed headlines, Einhorn was quick to fashion the deal as the ultimate in Fantasy Baseball, noting that becoming a Mets owner goes beyond his “wildest dreams.”
But I suspect the ever-analytical Einhorn has more than boyhood sentiment riding on his Mets bet.
In an investment world that has money managers facing an array of curve balls — from weak US growth, inflation fears, foreign competition and currency chaos — professional sports teams stand out as a store of value, and value is what Einhorn has built his fortune on. And for all their woes, the money-losing Mets still offer great value at a time of turmoil in the financial markets. How so?
First, the Mets have what Warren Buffett likes to call a “moat” around its business, the ultimate value-protection for investors like a safety squeeze.
As the only National League baseball team in the biggest city in the land, it is virtually immune from competition — and that monopoly status and accompanying brand name is worth a lot.
The scarcity factor and the fact that it is very rare to get the opportunity to invest in a blue-chip team adds to the premium these investments command.
Baseball is also immune from foreign competition. Unlike one of Einhorn’s other big investments — Microsoft — the Mets don’t have to worry about threats from India and China. And unlike Microsoft, where Einhorn’s calls to remove CEO Steve Ballmer may take months or years to catch fire, one fully expects that Einhorn, even as a minority owner with the Wilpons, will be able to effect change in the front office despite his assurances that he’s a passive investor.
Sports teams also offer an enviable hedge against inflation, as any baseball fan will attest. When was the last time the cost of a beer and hot dog decreased?
Clearly, Einhorn would rather have his $200 million invested in a team that has shown its relentless ability to raise ticket and concession stand prices than in a depreciating currency like the dollar. Yes, for all the stories that will highlight Einhorn’s great love of baseball, his Mets investment also says a lot about how hard it is for even the brightest minds on Wall Street to find an investment fit for the times.
Einhorn has the money and connections to get into this one-in-a-lifetime investment.
For the rest of us, making money over the next few years may be a lot harder than getting the Mets back into serious October baseball.
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