Einhorn’s Losing Gold-Miner Strategy Endorsed: Chart of the Day

David Einhorn’s Greenlight Capital Inc. suffered in the past year by favoring gold-mining stocks over the precious metal, a strategy that Scotia Capital Inc. recommended last week.

As the CHART OF THE DAY illustrates, two exchange-traded funds that Greenlight was buying in the third quarter of last year have declined since Sept. 30, 2011. Gold has risen about 9 percent during the same period in New York trading. Einhorn declined to comment on the performance.

Greenlight has stayed with one of the funds, the Market Vectors Gold Miners ETF (GDX), which invests in the metal’s biggest producers. The New York-based hedge fund is the third-largest shareholder even after cutting its stake by 17 percent in the second quarter, according to data compiled by Bloomberg.

The other ETF is also one of Van Eck Associates Corp.’s Market Vectors funds and tracks smaller mining companies, known as juniors. Greenlight finished last year’s third quarter with 1.9 million shares and sold all of them in the first half of this year, according to filings.

“There is a case to be made that the equities should start to outperform bullion,” Tanya Jakusconek, an analyst at Scotia Capital, wrote in a Sept. 20 report. Capital-spending cutbacks may lead to greater cash flow for many producers, the Toronto- based analyst wrote.

Five gold-mining stocks have the equivalent of buy ratings from Jakusconek, according to data compiled by Bloomberg. They are Agnico-Eagle Mines Ltd., Barrick Gold Corp., Eldorado Gold Corp., Goldcorp Inc. and Iamgold Corp.

To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

To contact the editor responsible for this story: Chris Nagi at chrisnagi@bloomberg.net

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