In this piece, we will take a look at the 10 best stocks to buy according to Billionaire David Einhorn.
The markets are broken and getting worse. That’s the stance held by billionaire investor David Einhorn, who insists we are in a secular destruction of the professional asset management community. The sentiments come against one of the longest bull runs that have resulted in valuations in the equity markets getting out of hand.
While the S&P 500 is at record highs after a 30% plus gain year to date, Einhorn views the markets as fundamentally broken. Passive investors with no opinion or concern about value have been the main drivers pushing the market higher while shunning underlying fundamentals. According to Einhorn, passive investors increasingly buy into market indexes by default, propping growth stocks at the expense of value stocks.
READ ALSO: Billionaire Daniel Sundheim’s Top 15 Stock Picks Heading Into 2025 and Billionaire David Tepper’s Top 10 Stock Picks Heading into 2025.
Likewise, the billionaire hedge fund manager laments that value investors are increasingly marginalized.
“And so effectively instead of the valuation becoming the signal, the valuation people were just noise and everybody else is sort of the signal. And this is why I think we have a structurally dysfunctional market, a bit of a broken market, and essentially a perpetual erosion of value as a strategy, as you would,” Einhorn said in an interview with CNBC.
The sentiments underline the growing concerns that value stocks are becoming increasingly cheaper and cheaper relative to their underlying fundamentals. That’s in part because investors are turning their attention to indexes and growth stocks, resulting in overstretched valuations. Increased focus on growth stocks at the expense of value stocks has resulted in one of the most expensive stock markets in decades.
Amid the premium valuations, David Einhorn insists there is still some value to unlock by focusing on value stocks trading at discounted valuations. By focusing on value investments, Einhorn has generated strong long-term returns through Greenlight Capital, the hedge fund he founded in 1996 with $900,000 from family and friends.
Likewise, Greenlight Capital rose to prominence at the height of the financial crisis, as Einhorn sensed a window of opportunity to generate some returns by shorting the stock of Lehman brothers. Similarly, it was on the news in 2002 as it shorted Allied Capital, a transaction that was validated in 2002 by the US Securities and Exchange Commission.
Since 1996, Greenlight Capital has averaged 13.1% in annual returns compared to 9.5% gains for the S&P 500. The outperformance comes from Einhorn emphasizing the balancing of long- and short-term exposure in investments. Likewise, he advocates monitoring industry risks and obtaining insurance against foreseeable macro threats.
Additionally, stock picking has always been essential as one of Einhorn’s key investment strategies of integrating considerable picture awareness into successful portfolio management strategies. Diversification as one of the ways of spreading risks is also Einhorn’s key investment strategies.
“Having my eyes open to the big picture doesn’t mean abandoning stock picking, but it does mean managing the long-short exposure ratio more actively, worrying about what may be brewing in certain industries, and, when appropriate, buying some just-in-case insurance for foreseeable macro risks even if they are hard to time,” Einhorn said.
David Einhorn
Our Methodology
To make the list of the best stocks to buy according to billionaire David Einhorn, we scanned Greenlight Capital’s investment portfolio. We then settled on the hedge fund’s largest holdings analyzing why they stand out and the number of hedge funds that hold stakes in them. Finally, we ranked the stocks in ascending order based on Greenlight Capital’s stake value.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Stocks to Buy According to Billionaire David Einhorn
10. CNH Industrial NV (NYSE:CNHI)
Greenlight Capital’s Stake Value: $78.78 Million
Number of Hedge Fund Holders: 24
CNH Industrial NV (NYSE:CNHI) is an industrial company engaged in designing, producing, marketing, selling, and financing agricultural and construction equipment. The agriculture part of the company makes and sells farm machines. The construction part makes and sells construction equipment, including excavators. It is one of the best stocks to buy, according to billionaire David Einhorn, as the agricultural machinery industry nears the end of a bearish cycle.
“It’s exactly the kind of situation that absolutely nobody cares about right now because it’s cheap, and the news over the next period of time isn’t going to be very good. Agriculture prices are low, and agricultural equipment is ending a down cycle,” Einhorn said at a panel with CNBC’s Leslie Picker.
While the industrial stock has underperformed, the market is going down by about 5%, and Einhorn expects it to bounce back heading into 2025. As aging equipment in the construction and agricultural sectors gets replaced, the billionaire investor expects CNH Industrial NV (NYSE:CNHI) to be one of the biggest beneficiaries. Its strong position in the U.S. machinery and construction industry makes it a solid position for robust growth.
CNH Industrial NV’s (NYSE:CNHI) effective cost management program has played a crucial role in this success, maintaining a healthy gross profit margin of 21.64% and keeping detrimental margins in check despite industry-wide pressures. The company’s ability to control costs, particularly in challenging economic conditions, is a key differentiator.
Ariel Global Fund stated the following regarding CNH Industrial N.V. (NYSE:CNHI) in its fourth quarter 2023 investor letter:
“We found an attractive entry point for London based, agriculture machinery manufacturer, CNH Industrial N.V. (NYSE:CNHI), as shares are currently pricing in multi-year declines similar to the slope of the last agricultural downcycle (2014- 2016). Although farm incomes have begun to moderate and will likely translate to lower machinery purchasing in 2024, our analysis of U.S. farm fundamentals suggests the severity and longevity of the next downcycle will likely be shallower and shorter in duration. Additionally, CNHI remains on track to deliver on previously articulated operational efficiency and cost savings targets, which should drive margin improvement and profitability growth over the near to medium term. Looking ahead, we believe the industry will benefit from precision agriculture.”
9. Viatris Inc. (NASDAQ:VTRS)
Greenlight Capital’s Stake Value: $84.41 Million
Number of Hedge Fund Holders: 57
Viatris Inc. (NASDAQ:VTRS) is a healthcare company that offers prescription brand drugs, generic drugs, complex generic drugs, biosimilars, and active pharmaceutical ingredients (APIs). It offers drugs in various therapeutic areas, including non-communicable and infectious diseases, and biosimilars in the areas of oncology, immunology, endocrinology, ophthalmology, and dermatology. The stock is up by about 10.54% for the year, attributed to financial performance and strategic positioning improvements.
The healthcare company delivered robust financial results on November 7, 2024, driven by positive momentum in all segments. It logged $3.8 billion in revenues and $133 million in new product revenues as the company continued to grow its revenue base. Additionally, Viatris Inc. (NASDAQ:VTRS) enhanced its financial strength with the repayment of $1.9 billion of debt. It also expanded its innovative portfolio by entering into an exclusive licensing agreement with Lexicon Pharmaceuticals for its lead product, sotagliflozin, outside the U.S. and Europe.
Viatris Inc.’s (NASDAQ:VTRS) North American generic business has been a major growth engine, driven by the introduction of successful new products. Notably, Wixela and Breyna have significantly improved the performance of this segment. By increasing its New Product Launch (NPL) revenue guidance for 2024 to the higher end of the $500 million to $600 million range, Viatris has shown confidence in its product pipeline. The company’s confidence in its ability to launch novel products and gain more market share is reflected in this upward revision.
8. Alight Inc. (NYSE:ALIT)
Greenlight Capital’s Stake Value: $87.66 Million
Number of Hedge Fund Holders: 40
Alight Inc. (NYSE:ALIT) is a technology company that provides cloud-based integrated digital human capital and business solutions. It offers employee well-being, integrated benefits administration, healthcare navigation, and optimization services for cloud platforms. The stock is down by about 16.05% for the year; its sentiments in the market hurt by lower volumes and reduced commercial activity. The winding down of the Hosted business operations has also weighed significantly on its operations.
Nevertheless, Alight Inc. (NYSE:ALIT) has moved to strengthen its long-term prospects through cloud migration transformation. Consequently, it is on course to receive $75 million in annualized savings as it focuses on technology-rich benefit services business. Expectations are high that Alight will return to robust growth and could see double-digit annual recurring revenue bookings growth.
In its third quarter, revenue was only down by 0.4% to $555 million, as recurring revenue accounted for 91% of the total revenue. On the other hand, contracted revenue was up by 9%. Gross profit increased to $174 million from $166 million delivered last year in the same quarter. However, net loss increased to $44 million from $40 million a year ago.
Alight Inc. (NYSE:ALIT) uses AI and machine learning to improve its business. Their AI engine, Alight LumenAI, enhances the Alight Worklife platform, making HR and financial tasks easier. This helps attract and keep clients by predicting patterns and spotting problems early. Alight is a leader in HR technology, benefiting from businesses wanting better employee experiences and streamlined HR processes.
Polen U.S. Small Company Growth Strategy stated the following regarding Alight, Inc. (NYSE:ALIT) in its Q3 2024 investor letter:
“We exited four positions during the quarter, including SiTime, AppFolio, RH, Doximity, and Alight, Inc. (NYSE:ALIT). Our position in Alight, a benefits outsourcing and business process-as-a-service company, was an unsuccessful investment. We decided to move on due to activist pressure that led to a breakup of the business. We were dissatisfied with both the plan and the new standalone business. This culminated with the CEO leaving and uncertainty over the company’s long-term strategic direction. As a result, we felt it was time to move on with better investment ideas in our pipeline.”
7. Liberty Global Ltd. (NASDAQ:LBTYA)
Greenlight Capital’s Stake Value: $89.78 Million
Number of Hedge Fund Holders: 38
Liberty Global Ltd. (NASDAQ:LBTYA) is a communication services company that provides broadband internet, video, fixed-line telephony, and mobile communications services. It offers value-added broadband services, such as WiFi features, security, anti-virus, firewall, and online storage solutions. It is one of the best-performing stocks in the Einhorn portfolio, going by the 34.45% year-to-date gain.
The impressive performance comes at the back of competitive pressure and a decline in consumer fixed and mobile revenue metrics. Nevertheless, Liberty Global Ltd. (NASDAQ:LBTYA) remains well-positioned to deliver solid financial results thanks to positive broadband net ads and mobile subscription growth.
The company is in the process of rebranding its Ventures segment to Liberty Growth, affirming its focus on investments in scalable tech and digital infrastructure. The ventures segment boasts a portfolio of about $3.5 billion and a strong cash balance sheet of $3.5 billion.
Liberty Global Ltd. (NASDAQ:LBTYA) has already completed the spinoff of Sunrise, consequently unlocking its value. Following the spinoff, the company’s share price has risen by 20%, adding to the 60% over the past year. The company’s long-term prospects hinge on its stakes in Virgin Media O2, Telenet, VodafoneZiggo, and a $3 billion Ventures investment portfolio. Even though the UK’s communication services company faces competitive pressures, it is also staring at growth opportunities through its broadband footprint and wholesale activities.
6. PENN Entertainment, Inc. (NASDAQ:PENN)
Greenlight Capital’s Stake Value: $106.01 Million
Number of Hedge Fund Holders: 37
PENN Entertainment, Inc. (NASDAQ:PENN) is a resort and casino company providing integrated entertainment, sports content, and gaming experiences. It also operates online sports betting in various jurisdictions. While the stock is down by about 26% for the year, its long-term prospects are solid. The company boasts a diverse portfolio of 43 properties across 20 states.
In addition, PENN Entertainment, Inc. (NASDAQ:PENN) is increasingly positioning itself for growth in online sports betting and iCasino operations. In order to increase market share and reduce short-term losses, PENN is concentrating on product quality. PENN has also added new features like Milestone (WA: MMD)’s Market Cards to improve player prop betting capabilities,
An important advancement for PENN Entertainment, Inc.’s (NASDAQ:PENN) digital strategy has been the collaboration with ESPN for the ESPN Bet platform. Nevertheless, a key component of PENN’s operations is its retail casino division. Consumer activity at the company’s regional casinos has been steady, and slot volume trends have been positive. In competitive markets like Iowa, Chicagoland, and Louisiana, PENN is investing in strategic developments like the new Joliet facility and the renovations to Margaritaville to lessen the impact of new casino openings.
5. Kyndryl Holdings, Inc. (NYSE:KD)
Greenlight Capital’s Stake Value: $113.16 Million
Number of Hedge Fund Holders: 33
Kyndryl Holdings, Inc. (NYSE:KD) is a company that provides technology and IT services. They offer cloud services, core enterprise services, applications, data services, and artificial intelligence services. Amid the artificial intelligence frenzy and growing demand for cloud computing solutions, it is turning out to be one of the best stocks to buy, according to billionaire David Einhorn.
Kyndryl Holdings, Inc. (NYSE:KD) is up by over 76% for the year, benefiting from solid financial results and growth trends affirming long-term prospects. While revenue was down by 7.4% in the fiscal second quarter, Signings for Kyndryl Consult grew 81% year over year. Kyndryl Holdings, Inc. (NYSE:KD) also posted $260 million in sales to cloud hyperscaler customers. It is also on track to hit its hyperscaler revenue target of nearly $1 billion in the current fiscal year.
The stock’s sentiments have also received a significant boost amid expectation that the company is slowly inching to profitability. Kyndryl Holdings, Inc.’s (NYSE:KD) net loss in the fiscal second quarter narrowed to $43 million from $142 million a year ago. The company’s profit margins are showing signs of improvement as more enterprises desire to implement AI-powered applications and services.
Kyndryl Holdings, Inc. (NYSE:KD) is experiencing some AI-related momentum, as evidenced by the robust growth of its consulting division and sales linked to alliances with cloud hyperscalers. Given the improving margins and the possibility that sales will resume growth in the upcoming fiscal year, the stock may still have room to rise.
Rewey Asset Management stated the following regarding Kyndryl Holdings, Inc. (NYSE:KD) in its Q3 2024 investor letter:
“We continue to see significant neglect and undervaluation in shares of Kyndryl Holdings, Inc. (NYSE:KD), a position that shows 94% upside to our AFV price target of $44.60 per share.
Kyndryl is a $5.5 billion market cap designer, builder, manager, and modernizer of mission critical, i.e., backbone, information technology infrastructure systems, including public, private, and multi-cloud environments. KD was spun out of IBM in November of 2021. Since the spin, KD has been aggressively repositioning its business by shedding unprofitable legacy IBM driven contracts, partnering with leading technology companies including MSFT, GOOGL, AMZN, SAP, VMW, ORCL, etc., signing new contracts at significantly higher margins, and optimizing its cost structure. Today’s KD bears little resemblance to its pre-spin form where IBM neglected profits in the unit to secure large hardware sales in separate divisions.
KD has maintained a very strong financial profile through its transition and has ample financial flexibility as it moves forward to a future that is likely to show strong revenue, earnings and free cash flow growth. KD’s net debt is very reasonable at $1.97 billion ($1.26 bil. cash, $3.24 bil. debt), approximately 79% of FY2025 expected EBITDA. KD’s financial strength is further amplified by its investment grade rating at all three agencies, and as it has not drawn down any of its $3.15 billion revolver…” (Click here to read the full text)
4. HP Inc. (NYSE:HPQ)
Greenlight Capital’s Stake Value: $126.65 Million
Number of Hedge Fund Holders: 42
HP Inc. (NYSE:HPQ) is a tech company offering personal computers, digital devices, and printing products. It provides desktops, notebooks, workstations, mobility devices, and software. Billionaire David Einhorn believes HP is a top stock pick, leveraging AI to boost PC sales. He predicts “high-teens growth” for HP and finds its stock, trading at around 10x earnings, very reasonable. Einhorn sees HP as a potential AI play in the tech market.
HP Inc.’s (NYSE:HPQ) PC portfolio is now equipped with artificial intelligence features that help analyze private files, create content and conduct various tasks. The integration is part of the company’s push to give people a reason to upgrade their PCs. The integration has come with the launch of one of the most potent next-generation AI business notebooks, Elitebook.
While IDC reports that generative AI PC sales are poised to grow by 234% by 2027, HPQ is one of the companies well poised to benefit from its new line of AI-powered PCs. HP Inc. (NYSE:HPQ) is already seeing strong demand for its hardware, going by a 1.7% increase in revenue in its fiscal fourth quarter to $14.1 billion. HP’s Personal Systems division, which includes PCs, brought in revenue of $9.6 billion, up 2%, while its Printing division delivered revenue of $4.5 billion, 1% higher.
Greenlight Capital stated the following regarding HP Inc. (NYSE:HPQ) in its Q2 2024 investor letter:
“In addition to gold, we had four material winners in our long portfolio this quarter. HP Inc. (NYSE:HPQ) jumped from $30.22 to $35.02. After seven quarters of declines, PC sales turned marginally positive during the quarter. The industry appears to be in the early stages of an upcycle, perhaps to be enhanced by recently launched AI-enabled PCs that are expected to ramp up over the next several quarters.”
3. Brighthouse Financial, Inc. (NASDAQ:BHF)
Greenlight Capital’s Stake Value: $130.23 Million
Number of Hedge Fund Holders: 32
Brighthouse Financial, Inc. (NASDAQ:BHF) is a financial services company that provides annuity and life insurance products. Its Life segment offers term, universal, whole, and variable life products for policyholders. While the stock is down by about 7% in 2024, the company continues to deliver solid financial results that affirm underlying growth.
Third quarter results delivered on November 7, 2024, show a 73% increase in revenue to $2.02 billion. However, net income fell by 67% to $150 million. Annuity sales for the year totaled $7.8 billion, with a 15% increase in Shield Annuity products as life insurance sales increased by 19% to $87 million. On the other hand, Brighthouse Financial, Inc.’s (NASDAQ:BHF) revenue is projected to grow at 16% per year over the next three years compared to the industry average growth rate of 5.3%.
In order to increase capital efficiency, unlock capital, and reach the desired combined RBC ratio, Brighthouse Financial, Inc. (NASDAQ:BHF) is still making headway on a number of strategic initiatives. The business is currently working with a third party to finalize a reinsurance deal. Under typical market circumstances, this transaction should bring the pro forma estimated combined risk-based capital to the low-end target range of 400% to 450%.
Here is what Greenlight Capital stated the following regarding Brighthouse Financial, Inc. (NASDAQ:BHF) in its Q2 2024 investor letter:
“However, it wasn’t all roses. We had three material losers in the long portfolio (and an undisclosed loser in the short portfolio), and deservedly so. Brighthouse Financial, Inc. (NASDAQ:BHF) fell from $51.54 to $43.34. In successive quarters, BHF announced large, non-recurring and unexpected losses. This time, the company suffered a loss in a reinsurance arbitration that cost several hundred million dollars.”
2. CONSOL Energy Inc. (NYSE:CEIX)
Greenlight Capital’s Stake Value: $171.70 Million
Number of Hedge Fund Holders: 31
CONSOL Energy Inc. (NYSE:CEIX) is an energy company that produces and sells bituminous coal. Its PAMC segment engages in the mining, preparing, and marketing of bituminous coal to power generators, industrial end-users, and metallurgical end-users. The stock is up by 11% for the year as investors react to robust financial results and strategic initiatives that affirm long-term prospects.
CONSOL Energy Inc. (NYSE:CEIX) delivered robust third-quarter results on November 5, 2024. Net income rose to $96 million with adjusted EBITDA of $179 million. The better-than-expected results came as coal production in the quarter totaled 7.2 million tons amid shutdowns in the quarter for maintenance. CEIX has already moved to strengthen its long-term prospects by acquiring Arch Resources. The acquisition should enhance its coal reserves.
In addition, CONSOL Energy Inc. (NYSE:CEIX) is targeting operational efficiency cost reductions and sales expansion to bolster its profit margins. The push should align with the company’s push to service the 18 million tons of coal already contracted. Its long-term outlook also remains solid amid reduced forecasts for coal plant retirements. The fossil fuel industry is once again a buzz of activities in the aftermath of Donald Trump winning the hotly contested election. The president-elect has always been a fossil fuel advocate in a bid to safeguard and enhance Americans’ energy needs.
Black Bear Value Partners stated the following regarding CONSOL Energy Inc. (NYSE:CEIX) in its Q3 2024 investor letter:
“ARCH and Warrior are 2 of the leading U.S. producers of high-quality metallurgical coal (“met coal”). This is the kind of coal used for steelmaking. ARCH also has a small thermal coal business that contributes ~20% of their earnings. CONSOL Energy Inc. (NYSE:CEIX) is a leading producer of thermal coal. During the 3rd quarter ARCH and CONSOL announced a merger which should close in the first half of 2025. I am generally constructive on the merger as the Companies should be able to realize some modest synergies. My sense is more mergers will be coming to this sector given the depressed prices of the securities.
Met coal demand is projected to climb for the next 25 years, driven by the economic development and urbanization in India and the rest of Southeast Asia. ~60% of the world’s population lives in Asia, where met coal demand is centered and where local sources are limited. Over the coming years demand will likely outstrip supply, leading to higher prices. There has been a severe lack of investment in met coal due to ESG concerns with investment peaking in 2014.”
1. Green Brick Partners, Inc. (NYSE:GRBK)
Greenlight Capital’s Stake Value: $790.72 Million
Number of Hedge Fund Holders: 23
Green Brick Partners, Inc. (NYSE:GRBK) is a diversified homebuilding and land development company. It acquires land to develop residential lots transferred to controlled builders or sold to third-party homebuilders. It also provides a financial services platform, including mortgage and title services. As interest rates come down and consumer purchasing power improves, it is one of the best stocks to buy, according to billionaire David Einhorn.
The stock is already up by more than 21% for the year, outperforming amid a challenging market environment hurt by high interest rates. Green Brick Partners, Inc. (NYSE:GRBK) delivered record-breaking Q3 2024 results on October 30, 2024. It logged a 25.7% increase in revenues at $523 million after delivering 956 homes at an average price of $546,900. Likewise, earnings per share were up 27% to $1.98.
Green Brick Partners continues to deliver industry-leading building gross margins of 32.7%. Higher margins come as the company sees a significant increase in net new orders that were up 11.3% to 877 units. Likewise, the company is on course to achieve record revenue in fiscal 2024.
Green Brick Partners, Inc. (NYSE:GRBK) plans to invest $700 million in land acquisition and development and plans to introduce Green Brick Mortgage in Q1 2025. In keeping with its infill strategy, the business also intends to grow into northern Austin, Texas. The company’s strategic growth plans affirm long-term prospects.
While we acknowledge the potential of Green Brick Partners, Inc. (NYSE:GRBK) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GRBK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
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