According to two recent filings with the Securities and Exchange Commission, David Einhorn‘s (pictured) Greenlight Capital and Dan Loeb‘s Third Point have increased their respective stakes in Green Brick Partners Inc (NASDAQ:GRBK). Greenlight disclosed acquiring some 9,000 shares that it directly owns and some 8.48 million shares that it indirectly owns through its affiliated funds, taking its total stake in the company to 24.13 million shares. The holding amasses about 51% of the company’s outstanding shares. As for Third Point, the fund directly acquired about 100,000 shares and indirectly some 8.08 million shares. The total current stake amounts to 8.18 million shares and represents about 17% of the company’s outstanding stock. The first hefty hike by the two activists in their Green Brick holdings came in October of last year after Green Brick Partners Inc (NASDAQ:GRBK), formerly known as Biofuel Energy Corp completed the acquisition of JBGL Builder Finance and subsidiaries of JBGL Capital from Greenlight affiliates and James R. Brickman.
Einhorn, one of the most successful long/short hedge fund manager of the past decade learned the art of investing from Gary Siegler and Peter Collery, managers of SC Fundamental Value Fund. Loeb’s investment acumen is also well recognized in investment circles as well. At the end of March, the market value of Greenlight’s public equity portfolio stood at $7.65 billion, while the same portfolio of Third Point’s amounted to $10.82 billion.
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Following activist funds like Greenlight and Third Point is important because it is a very specific and focused strategy in which the investor doesn’t have to wait for catalysts to realize gains in the holding. Funds like Greenlight or Third Point can simply create its own catalysts by pushing for them through negotiations with the company’s management and directors. In recent years, the average returns of activists’ hedge funds has been much higher than the returns of an average hedge fund. Furthermore, we believe do-it-yourself investors have an advantage over activist hedge fund investors because they don’t have to pay 2% of their assets and 20% of their gains every year to compensate hedge fund managers. We have found through extensive research that the top small-cap picks of hedge funds are also capable of generating high returns and built a system around this premise. In the 34 months since our small-cap strategy was launched it has returned over 135% and beaten the S&P 500 ETF (SPY) by more than 80 percentage points (read more details). Soon, we’ll be releasing a new quarterly newsletter written by former activist hedge fund analyst Michael Bland that tracks ten or so activist campaigns at any given time.
Recently, Green Brick Partners Inc (NASDAQ:GRBK) completed the offering of 17 million shares at a unit price of $10. The net proceeds which amounted to approximately $165.6 million will mostly be used to pay the outstanding debt in connection with the company’s term loan facility with affiliates of Greenlight. So far this year Green Brick Partners Inc (NASDAQ:GRBK)’s stock has appreciated by more than 52%. In comparison, the general Real Estate industry has risen by 7.7% during the same period. Despite the steep rise of the $558.18 million real estate operator, hedge fund interest in the company decreased over the first quarter. Among the funds that we track, five had investments in the company totaling $183.09 million at the end of March, as compared with seven firms with $182.58 million at the end of the previous quarter.
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In its financial results for the first quarter, Green Brick Partners Inc (NASDAQ:GRBK) reported an EPS of $0.20 and revenues of $58.45 million, which were 7.2% lower on a year-over-year basis. The stock is currently trading at 1.82% below its 52-week high and has an earnings multiple of 3.47 attached to it as compared to the industry’s average of 10.76.
Israel Englander‘s Millennium Management disposed of its entire stake comprising some 11,100 shares during the first three months of the year, while Jim Simons‘ Renaissance Technologies disposed of some 100,100 shares of Green Brick Partners Inc (NASDAQ:GRBK), lowering the fund’s total stake to 222,182 shares valued at $1.84 million.
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