In this article, we take a look at the 10 best stocks to buy according to David Einhorn’s Greenlight Capital. You can skip our detailed analysis of Greenlight Capital’s history, investment philosophy, and hedge fund performance, and go directly to the 5 Best Stocks to Buy According to David Einhorn’s Greenlight Capital.
Greenlight Capital is a New York-based hedge fund founded by David Einhorn in 1996. David Einhorn grew up in Milwaukee and graduated from Cornell University. His fund has a portfolio value of $1.5 billion. The hedge fund is known for investing in stocks of public companies as well as debt offerings. Greenlight Capital returned -2.9% in the Q2 of 2021 relative to 8.5% for the S&P 500 index. Long holdings made up quarterly 5.3% while short holdings detracted 4.6% and macro investing detracted 3.3%.
Greenlight Capital invests in both long and short-term equities but is mostly recognized for short-selling. A notable short-selling of Greenlight Capital was the stake in Lehman Brothers whose bankruptcy was one of the many triggers of the financial crisis of 2008. The hedge fund Greenlight Capital analyzes various aspects of the market for investment including quantitative analysis, annual filing reports and market sentiment.
The hedge fund in its investor letter in Q2 of 2021 opined that cheap equity is deficient in traditional industries like housing, manufacturing, mining and intermediate goods which limits expansion and will sustain higher prices until the needed investment is acquired. Here is what was said in the fund letter.
“Traditional industrial companies receive such low valuations and their implicit cost of equity is so high, that investors have demanded dividends and buybacks rather than expansion. Prior experience and policy makers suggest that higher prices are “transitory,” so it will take sustained higher prices and higher pricing expectations to induce the needed investment to satisfy the increased demand in the post-COVID recovery. The result, we believe, will be continued under-investment leading to sustained higher prices in a number of industries and rising profits for industry participants. Our long portfolio is stacked with companies that are poised to benefit.”
Some of the notable investments of the fund as of the second quarter include Teck Resources Limited (NYSE: TECK), Change Healthcare Inc. (NASDAQ: CHNG), and GoPro, Inc. (NASDAQ: GPRO).
David Einhorn of Greenlight Capital
Our Methodology
To outline the 10 best stocks to buy according to David Einhorn’s Greenlight Capital, we’d be ranking the stocks based on three metrics: the stake value of the hedge fund in the particular company, the percentage that their stake represents relative to their entire 13F portfolio and the number of hedge funds with holdings in the company. It is pertinent to mention that the data is from the second quarter of 2021.
Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
With that said, let’s move down to the 10 best stocks to buy according to David Einhorn’s Greenlight Capital.
10. Resideo Technologies, Inc. (NYSE:REZI)
Greenlight Capital’s Stake Value: $42.6 million
Percentage of Greenlight Capital’s 13F Portfolio: 2.67%
Number of Hedge Fund Holders: 28
Resideo Technologies, Inc. (NYSE: REZI) is an American company that caters to customers across the globe. It is headquartered in Austin, Texas. The company provides smart-home solutions for comfort and security.
Praesidium Investment Management Company is the leading stakeholder in the company with shares over 7.4 million representing almost 12% of their portfolio.
On October 6, Morgan Stanley analyst Erik Woodring decreased his price target on Resideo Technologies, Inc. (NYSE: REZI) to $31 from $33, keeping an ‘Equal Weight’ rating on the shares.
9. GoPro, Inc. (NASDAQ:GPRO)
Greenlight Capital’s Stake Value: $42.6 million
Percentage of Greenlight Capital’s 13F Portfolio: 2.67%
Number of Hedge Fund Holders: 28
GoPro, Inc. (NASDAQ: GPRO) was founded in 2002 by Nick Woodman. The company manufactures first-person action cameras that have found many applications across the civilian and military domains. The company also produces its own dedicated video-editing software.
Greenlight Capital holds over 3.6 million shares in GoPro, Inc. (NASDAQ: GPRO) after a bullish increase in stake by 261% in the second quarter. The hedge fund Iridian Asset Management is the leading stakeholder in the company with over 6.7 million shares representing 1.38% of their portfolio.
On September 16, GoPro, Inc. (NASDAQ: GPRO) announced its new state-of-the-art camera called Hero10 Black, featuring the company’s latest GP2 processor that allows for breakthrough image quality and delivers 5.3K videos at 60 frames per second and double the frames per second for 4K videos.
GoPro, Inc. (NASDAQ: GPRO), along with Teck Resources Limited (NYSE: TECK) and Change Healthcare Inc. (NASDAQ: CHNG), is one of the prominent companies that Greenlight Capital has a stake in.
8. Danimer Scientific, Inc. (NYSE:DNMR)
Greenlight Capital’s Stake Value: $52.8 million
Percentage of Greenlight Capital’s 13F Portfolio: 3.31%
Number of Hedge Fund Holders: 30
Danimer Scientific, Inc. (NYSE: DNMR) manufactures environment-friendly products using biodegradable polymers for use as an alternative to plastic, which has been a source of pollution across the world. It was founded in 2004.
Greenlight Capital has over 2 million shares in the company after a decrease of 3% in stake in the second quarter of 2021. On September 23, Cowen analyst Thomas Boyes initiated the coverage of Danimer Scientific, Inc. (NYSE: DNMR) with an ‘Outperform’ rating and a price target of $21.
7. Concentrix Corporation (NASDAQ:CNXC)
Greenlight Capital’s Stake Value: $62.6 million
Percentage of Greenlight Capital’s 13F Portfolio: 3.93%
Number of Hedge Fund Holders: 21
Concentrix Corporation (NASDAQ: CNXC) is headquartered in Fremont, California. It provides solutions for improving business performance in industries like banking, finance, energy, media and communication and insurance.
Lyrical Asset Management was the leading stakeholder in Concentrix Corporation (NASDAQ: CNXC) as of Q2 of 2021 with over 1 million shares representing 2.02% of their portfolio.
Barrington analyst Vincent Colicchio raised his price target on Concentrix Corporation (NYSE: CNXC) to $202 from $182, keeping an ‘Outperform’ rating on the shares after the third quarter results.
Concentrix Corporation (NYSE: CNXC) is another popular stock on the list of 10 best stocks to buy according to David Einhorn’s Greenlight Capital. Other prominent stocks on the list include those of companies like Teck Resources Limited (NYSE: TECK), Change Healthcare Inc. (NASDAQ: CHNG) and GoPro, Inc. (NASDAQ: GPRO).
6. Change Healthcare Inc. (NASDAQ: CHNG)
Greenlight Capital’s Stake Value: $79.5 million
Percentage of Greenlight Capital’s 13F Portfolio: 4.99%
Number of Hedge Fund Holders: 51
Change Healthcare Inc. (NASDAQ: CHNG) provides solutions like health information exchange and revenue cycle management, among others. It is one of the prominent companies whose stock has made it to the list of best stocks to buy according to David Einhorn’s Greenlight Capital.
Greenlight Capital has over 3.4 million shares in the company and it takes up 4.99% of their total 13F portfolio as of the second quarter of 2021. Also, as of Q2 of 2021, D E Shaw and Berry Street Capital hedge funds were bullish on the CHNG stock and the hedge fund Abrams Capital Management was the leading stakeholder in the company with over 13.9 million shares in the company making up 7.14% of their portfolio.
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Disclosure: None. 10 Best Stocks to Buy According to David Einhorn’s Greenlight Capital is originally published on Insider Monkey.
