A billionaire investor struck gold last quarter by, well, investing in it.

David Einhorn's Greenlight Capital gained 8.2% in the first quarter, handily outpacing a more-than-4% loss in the S&P 500. In an letter to clients viewed by Business Insider, the firm said that the precious metal was "by far the biggest winner" in its portfolio, advancing 19%.

Greenlight, which said it owns both gold bars and call options, also performed well against a benchmark of hedge funds. The average fund lost an average of 0.4% in the first quarter, according to research group HFR.

The firm said inflation swaps were an additional catalyst for outperformance. Between the swaps and gold — which is viewed as an inflation hedge — the expectation of higher consumer prices is a theme across the Greenlight portfolio. Forecasts for higher inflation have been a constant of the Trump presidency since a global trade war kicked off.

"We believe that nearly all current administration policy roads lead to higher inflation," the firm wrote.

Another highlight of the Greenlight letter was the assertion that the US equity market is in the early innings of a bear market. The firm was able to pinpoint exactly when it decided to throw in the towel on equities.

"Sensing that the market was turning, in late February we pivoted from conservative, but not bearish, to bearish," the letter said.

Sticking to the safety zone

In predicting a bear market, Greenlight has decreased its net equity exposure to isolate itself from sharp declines and counter-trend upswings.

"Bear markets do not go straight down. They are punctuated with 'rip-your-face-off' rallies based on big headlines, extreme investor sentiment, and experience that buying the dip usually pays off," the letter said.

Here's a rundown of some other trades Greenlight identified in its first-quarter letter:

• Short positions on companies that "cater to liberal tastes": Greenlight expects that Democratic consumers will pull back, given their disproportionate exposure to recent federal job cuts.
• Long position in SOFR futures: These investments are positioned to profit if the Fed cuts interest rates faster than the market thinks, which is what Greenlight expects.
• "Tail protection" for the dollar: Greenlight has added this position in the case the greenback falls substantially against the euro and yen. This has already been happening.
• Long-duration inflation swaps: As mentioned above, the firm predicts that most Trump administration policies will result in higher long-term inflation.