In this article, we discuss the 5 favorite stock picks of David Einhorn according to his 2022 portfolio. If you want to read our detailed analysis of Einhorn’s stock picks and hedge fund performance, go directly to David Einhorn Having a Banner Year in 2022: 10 Favorite Stock Picks.
5. Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW)
Greenlight Capital’s Stake Value: $73.07 million
Percentage of Greenlight Capital’s 13F Portfolio: 4.64%
Number of Hedge Fund Holders: 36
Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) provides outsourced aircraft and aviation operating services. It posted an EPS of $2.99 for the first quarter, beating estimates by $0.36. The quarterly revenue was recorded at $1.04 billion, above estimates by $16.02 million and signalling a jump of 20.42% over the same period last year.
Wolfe Research analyst Scott Group on April 5 downgraded Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) to ‘Underperform’ from ‘Peer Perform’ with a price target of $73. He named the firm among 3 others in his transport coverage where he sees the most risk for the first quarter. In January, the company announced that it ordered four new Boeing 777 freighters, in response to growing customer demand in the e-commerce and express markets.
As of the end of the first quarter, Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) stock was held by 36 hedge funds, as compared to 35 hedge funds in the preceding quarter. Hill City Capital, with a $123.9 million stake consisting of 1.43 million shares, was the most prominent shareholder of Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) at the end of the first quarter of 2022.
Here is what Einhorn’s Greenlight Capital had to say about Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) in its Q2 2021 investor letter:
“Air Freight
COVID caused a dramatic reduction in passenger aviation. Passenger planes often carry freight in their bellies. With planes grounded, capacity came out of the industry. At the same time, freight demand expanded both due to the recovering economy and growing ecommerce, which often emphasizes air shipments. While there has been some recovery in passenger aviation, airlines are emphasizing narrow-body planes, which carry less freight than wide-body planes. Compared to 2019, current air freight demand is about 10% higher and capacity is about 10% lower. The result is that cargo rates have exploded.
Supply will be slow to come on-line. Some passenger planes are being converted to freighters, but conversion capacity for wide-bodies is limited and the aggregate impact of this will be modest. Meanwhile, air freight companies trade at tiny multiples of what investors assume to be peak profits. The implied cost of equity is quite high, which makes it difficult to justify adding assets. As a result, air freight companies are in no rush to order new planes, and in any case, new orders would take several years to build. The result is rates and profits are likely to be higher than expected for quite some time.
We own Atlas Air Worldwide (AAWW), which is poised to benefit. It trades at around 5x this year’s consensus earnings estimates.”
4. Change Healthcare Inc. (NASDAQ:CHNG)
Greenlight Capital’s Stake Value: $81.65 million
Percentage of Greenlight Capital’s 13F Portfolio: 5.18%
Number of Hedge Fund Holders: 50
Change Healthcare Inc. (NASDAQ:CHNG) operates as a healthcare technology company. It provides data and analytics-driven solutions which are used to enhance clinical, financial, administrative, and patient engagement outcomes in the US healthcare system.
On March 31, Credit Suisse analyst Jonathan Yong assumed coverage of Change Healthcare Inc. (NASDAQ:CHNG) with a ‘Neutral’ rating, and gave the stock an unchanged price target of $25.75.
At the close of the first quarter, David Einhorn’s Greenlight Capital owned 3.74 million shares of Change Healthcare Inc. (NASDAQ:CHNG) at a value of $81.7 million, representing 5.18% of his total portfolio. This signalled an increase of 3% in holding over the previous quarter.
50 hedge funds were long on the company shares at close of Q1 2022, as compared to 48 hedge funds a quarter earlier. David Abrams’ Abrams Capital Management held nearly 17 million shares of Change Healthcare Inc. (NASDAQ:CHNG) with a value of $370.1 million, making it the firm’s largest shareholder in the first quarter of 2022.
3. Teck Resources Ltd (NYSE:TECK)
Greenlight Capital’s Stake Value: $120.19 million
Percentage of Greenlight Capital’s 13F Portfolio: 7.63%
Number of Hedge Fund Holders: 56
Teck Resources Ltd (NYSE:TECK) is a Canadian firm which acquires and develops natural resources around the world. Its products include copper, gold, coal, lead, zinc and silver, along with chemicals and fertilizers as well.
RBC Capital analyst Sam Crittenden on April 28 kept an ‘Outperform’ rating on Teck Resources Ltd (NYSE:TECK) shares, and increased the price target to C$61 from C$52. The company shares have surged 84.08% in the last 12 months, and 41.02% in the year to date as of May 24.
For Q1 2022, Teck Resources Ltd (NYSE:TECK) disclosed earnings per share of $2.31, exceeding estimates by $0.06. $3.93 billion in quarterly revenue was also above consensus figures by $16.1 million.
Many investors apart from David Einhorn were also bullish on Teck Resources Ltd (NYSE:TECK). At the close of the first quarter, 56 hedge funds reported bullish bets on the company shares, as opposed to 40 in the previous quarter. Its largest Q1 shareholder was Soroban Capital Partners with a $495.2 million stake.
2. Brighthouse Financial, Inc. (NASDAQ:BHF)
Greenlight Capital’s Stake Value: $187.92 million
Percentage of Greenlight Capital’s 13F Portfolio: 11.94%
Number of Hedge Fund Holders: 32
Based in North Carolina, Brighthouse Financial, Inc. (NASDAQ:BHF) deals in the provision of life insurance and annuities. David Einhorn was the largest shareholder of the firm as of the first quarter of 2022, with a $187.9 million stake. In total, 32 hedge funds were long on the company shares in the first quarter of 2022, up from 30 in the previous quarter.
On April 12, Wells Fargo analyst Elyse Greenspan upgraded the company shares to ‘Equal Weight’ from ‘Underweight’ with a revised price target of $54 from $53. The analyst notes that long-term interest rates have significantly increased, and this could benefit Brighthouse Financial, Inc.’s (NASDAQ:BHF) valuation. She also holds that the company can repurchase a meaningful portion of its market cap over the next 3 years.
Brighthouse Financial, Inc. (NASDAQ:BHF) posted EPS of $3.79 for the first quarter, outperforming analysts’ forecasts by $0.30. However, quarterly revenue of $2.24 billion fell below market estimates by $22 million, and declined 5.48% in comparison to the year-ago quarter.
Greenlight Capital shared its views on Brighthouse Financial, Inc. (NASDAQ:BHF) in a letter to investors in the first quarter of 2022. The fund said:
“Speaking of rising interest rates, it is difficult to find a company that we think benefits more from rising rates than Brighthouse Financial (BHF). For the better part of half a decade, we have experienced the “bear case” that BHF is beholden to capital markets and particularly sensitive to low interest rates. Our view is that the shares have been inexpensive despite a low interest rate environment. With the environment changing, it turns out that the capital market sensitivity goes both ways. Goldman Sachs estimates that the interest rate increase just through the end of March will add $2 billion to BHF’s distributable earnings over the next 5 years. That would seem significant compared to BHF’s entire equity market capitalization of $4 billion. Two billion dollars would equate to about $26 per share. The stock ended the quarter at $51.66.
Gains from a higher interest rate environment need not be temporary. The company is now presented with an opportunity to reduce interest rate risk either by hedging or by transferring risk of its legacy business to a third party reinsurer. BHF has not attracted a new top 30 institutional shareholder in more than a year and its share price fell by less than one percent during the quarter. Management is taking advantage of the rising discount to book value by repurchasing shares. The improved environment should enable even faster share repurchases, which we would encourage the company to pursue.”
1. Green Brick Partners, Inc. (NASDAQ:GRBK)
Greenlight Capital’s Stake Value: $336.74 million
Percentage of Greenlight Capital’s 13F Portfolio: 21.39%
Number of Hedge Fund Holders: 13
Green Brick Partners, Inc. (NASDAQ:GRBK) was the largest holding of David Einhorn’s Q1 2022 portfolio, with a $336.7 million stake. The company offers homebuilding services in the United States.
B. Riley analyst Alex Rygiel on April 6 gave Green Brick Partners, Inc. (NASDAQ:GRBK) a ‘Buy’ rating, and lowered the firm’s price target to $25 from $27. The analyst attributed the drop in price target to near-term weakness in deliveries causes by supply chain issues.
In the first quarter, Green Brick Partners, Inc. (NASDAQ:GRBK) recorded a revenue of $393.6 million, beating market estimates by $51.9 million and representing year-on-year growth of 67.87%. EPS stood at $1.20, outperforming estimates by $0.35.
Of the 900+ hedge funds tracked by Insider Monkey, 13 held positions in Green Brick Partners, Inc. (NASDAQ:GRBK) with a combined value of $376.3 million. This shows a positive trend over the previous quarter where $587.7 million worth of stakes were held by 12 hedge funds.
David Einhorn’s Greenlight Capital talked about Green Brick Partners, Inc. (NYSE:GRBK) and the housing sector in detail in its Q1 2022 investor letter. The fund said:
“For the quarter, our long portfolio lost 7%, which was almost completely offset by gains on our shorts and index hedges. Macro, led by inflation swaps and gold, generated slightly more than all the return. The long portfolio attribution bifurcated into Green Brick Partners (GRBK), which fell sharply and was responsible for much more than all the loss, and pretty much everything else, which did quite well..
..Despite the fact that there was nothing wrong with GRBK’s corporate performance, the shares fell from $30.33 to $19.76 during the quarter. Analysts reduced 2022 and 2023 EPS expectations by about 2%, leaving the shares at 4.7x and 4.3x those estimates. The problem was with the sector, as most homebuilders fell by similar percentages.
Homebuilding stocks de-rated as a consensus formed around a pending collapse in housing. The narrative is that house prices have risen, interest rates (and therefore mortgage rates) are rising, sales and housing starts are slowing, inventories are building, and cancellations are rising. Supposedly, this implies that house prices are about to collapse, leaving homebuilders in a precarious position. Everyone remembers what happened when the last housing bubble popped. The market appears to be saying that it is about to happen again and that the sector is now un-investable at pretty much any valuation… ” (Click here to see the full text)
You can also take a look at 10 Best Dividend Stocks for Passive Income and 10 Best Value Stocks To Buy Now.
