If corporate earnings are cooked, so is the market.
That's how billionaire investor David Einhorn is betting on stocks—a view that has lost his hedge fund firm Greenlight Capital money so far this year.
"All told, there is a good chance earnings will actually shrink this year," Greenlight's most recent letter to investors said. "We think the market is too high if earnings have, in fact, peaked for the cycle, and we have reduced our net exposure by adding more shorts."
The letter did not list new short positions. Einhorn recently told a conference audience that he was still betting against Athenahealth.
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The firm's main fund fell 1.7 percent for the quarter, net of fees, according to the letter, which CNBC.com obtained. That compares to a gain of 1.92 percent for the average U.S. stock-focused hedge fund, according to industry news and data service Absolute Return.
Top winners for the quarter were positions in Apple and SunEdison, according to the letter. So-called short bets against stocks and a long stake in lost money.
Greenlight disclosed three new long positions in the note: AerCap Holdings, Chicago Bridge & Iron, and General Motors. The firm exited positions in Aetna and Amdocs (both longs) and Safeway, Freescale Semiconductor and Lorillard (all shorts).
A spokesman for Greenlight declined to comment. The New York-based firm manages approximately $12 billion.
The Greenlight letter expressed frustration in finding attractive companies to bet on gaining in value.
"Short candidates are easy to find, but as noted above, the opportunity set on the long side is quite constrained," the letter said.
"Most of the investment theses we have reviewed over the past several months can at best be described as late-cycle opportunities, with valuations that often ignore historical economic sensitivity. The operating (and in some cases activist) execution needed to achieve target results has to be rated at Triple Lindy difficulty level."
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News of the Greenlight letter was first reported by financial blog ValueWalk.
