In this article, we discuss the top 5 stock picks of David Einhorn’s Greenlight Capital. If you want to see more of the billionaire’s favorite stocks, click David Einhorn’s Greenlight Capital Portfolio: Top 10 Stock Picks.
5. Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW)
Greenlight Capital’s Stake Value: $76,708,000
Percentage of Greenlight Capital’s 13F Portfolio: 4.38%
Number of Hedge Fund Holders: 35
Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) is a New York-based company that provides aircraft and aviation services via its subsidiaries. In Q4 2021, Greenlight Capital owned 815,000 shares of Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW), worth $76.70 million, accounting for 4.38% of the hedge fund’s total 13F portfolio.
On February 17, Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) reported earnings for the fourth quarter of 2021. The company posted an EPS of $7.05, beating analysts’ consensus estimates by $0.82. Revenue over the period jumped approximately 25% year-over-year to $1.16 billion, outperforming market forecasts by $59.49 million.
Wolfe Research analyst Scott Group on April 5 downgraded Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) to Underperform from Peer Perform.
Among the hedge funds tracked by Insider Monkey, 35 funds were bullish on Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW), up from 27 funds in the preceding quarter. Herbert Frazier’s Hill City Capital owns the biggest stake in the company, with 1.4 million shares worth approximately $135 million.
Here is what Greenlight Capital has 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: $77,755,000
Percentage of Greenlight Capital’s 13F Portfolio: 4.44%
Number of Hedge Fund Holders: 48
Change Healthcare Inc. (NASDAQ:CHNG) is a healthcare technology company that offers data analytics and healthcare management solutions to improve clinical, financial, and patient outcomes in the American healthcare space. Credit Suisse analyst Jonathan Yong assumed coverage of Change Healthcare Inc. (NASDAQ:CHNG) with a Neutral rating on March 31, assigning the stock an unchanged price target of $25.75.
David Einhorn’s Greenlight Capital held 3.6 million shares of Change Healthcare Inc. (NASDAQ:CHNG) in Q4 2021, worth $77.75 million, accounting for 4.44% of the fund’s total 13F securities.
Change Healthcare Inc. (NASDAQ:CHNG) on February 2 reported its Q4 results. The company posted earnings per share of $0.36, beating estimates by $0.01. The $866.07 million revenue increased 10.31% year-over-year, surpassing market consensus by $24.48 million.
According to Insider Monkey’s Q4 data, 48 hedge funds were bullish on Change Healthcare Inc. (NASDAQ:CHNG), with combined stakes of $1.60 billion, compared to 50 funds in the earlier quarter, holding stakes in Change Healthcare Inc. (NASDAQ:CHNG) worth $1.5 billion. David Abrams’ Abrams Capital Management is the leading stakeholder of the company, with approximately 17 million shares valued at $363 million.
3. Teck Resources Limited (NYSE:TECK)
Greenlight Capital’s Stake Value: $97,871,000
Percentage of Greenlight Capital’s 13F Portfolio: 5.59%
Number of Hedge Fund Holders: 40
Teck Resources Limited (NYSE:TECK) is a natural resources company based in Vancouver, Canada. The company provides steelmaking coal, copper, gold, blended bitumen, lead, silver, molybdenum, zinc, and zinc concentrates.
Securities filings for Q4 2021 reveal that David Einhorn’s Greenlight Capital held 3.3 million shares of Teck Resources Limited (NYSE:TECK), worth $97.8 million, representing 5.59% of the hedge fund’s total holdings for the period.
In 2021, Teck Resources Limited (NYSE:TECK)’s full-year revenue amounted to $10.6 billion, compared to $7 billion in 2020. The 2021 net income of $2.2 billion strongly rebounded from the net loss of $679 million in the prior year. The cash at hand also increased to $1.12 billion in 2021 from $353.7 million in 2020.
On April 12, BMO Capital analyst Jackie Przybylowski maintained an Outperform rating on Teck Resources Limited (NYSE:TECK) but lowered the firm’s price target on the shares to C$57 from C$61.
The fourth quarter database of Insider Monkey suggests that 40 hedge funds placed long calls on Teck Resources Limited (NYSE:TECK), holding stakes in the company worth $1.62 billion. Eric W. Mandelblatt’s Soroban Capital Partners held the biggest position in Teck Resources Limited (NYSE:TECK), with more than 11 million shares valued at $318.5 million.
2. Brighthouse Financial, Inc. (NASDAQ:BHF)
Greenlight Capital’s Stake Value: $196,202,000
Percentage of Greenlight Capital’s 13F Portfolio: 11.22%
Number of Hedge Fund Holders: 30
Brighthouse Financial, Inc. (NASDAQ:BHF) is a North Carolina-based company that offers annuity and life insurance products in the United States. In the fourth quarter of 2021, David Einhorn reported owning 3.78 million shares of Brighthouse Financial, Inc. (NASDAQ:BHF), worth $196.2 million, representing 11.22% of the total 13F securities.
On April 12, Barclays analyst Tracy Benguigui reiterated an Equal Weight rating on Brighthouse Financial, Inc. (NASDAQ:BHF) and slashed the firm’s price target on the stock to $55 from $61. The analyst stated that recent outperformance in life insurance compared to banks and the S&P 500 Index feels more like a catch-up trade than improved business fundamentals. He continues to see possible underperformance for the insurance group if a global recession occurs in 2024.
Brighthouse Financial, Inc. (NASDAQ:BHF) reported its Q4 results on February 10, posting an EPS of $4.02, topping estimates by $0.50. Revenue over the period jumped 8.06% from the prior-year quarter to $2.32 billion, surpassing market consensus by $119.69 million.
Among the hedge funds tracked by Insider Monkey, 30 funds were long Brighthouse Financial, Inc. (NASDAQ:BHF) at the end of December 2021, with total stakes valued at $468.3 million. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital is a prominent position holder in the company, with 1.3 million shares worth $72.2 million.
Here is what Greenlight Capital has to say about Brighthouse Financial, Inc. (NASDAQ:BHF) in its Q4 2021 investor letter:
“Brighthouse Financial (BHF) gained 15% as the shares appreciated from $45.23 to $51.80 each. The company reported another strong quarter and accelerated its pace of share buybacks. For the year, BHF advanced 43%. Due mostly to strong investment performance, adjusted earnings per share are expected to be $18.52 in 2021, compared to expectations a year ago of $11.45. We expect BHF to announce that it has repurchased about 12% of its shares during 2021. The analysts continue to be unimpressed, as the lone bull on the stock downgraded his rating, and BHF now has 8 ‘hold’ ratings and 2 ‘sell’ ratings. BHF itself is the main buyer of its own shares; we expect the company to retire another double-digit percentage of the float in 2022.”
1. Green Brick Partners, Inc. (NYSE:GRBK)
Greenlight Capital’s Stake Value: $528,308,000
Percentage of Greenlight Capital’s 13F Portfolio: 30.22%
Number of Hedge Fund Holders: 12
Green Brick Partners, Inc. (NYSE:GRBK) is a Texas-based homebuilding and land development company. David Einhorn placed his largest portfolio bet on Green Brick Partners, Inc. (NYSE:GRBK) as a hedge against inflation. His fund owns 17.4 million shares of the company, worth $528.3 million, representing 30.22% of the total 13F holdings.
In 2021, the full-year revenue for Green Brick Partners, Inc. (NYSE:GRBK) stood at $1.4 billion, compared to $976 million in 2020. The net income in 2021 came in at $190.2 million, up from $112.7 million in the prior year. The 2021 cash and cash equivalents were $78.7 million, an increase of 304% from the previous year.
On April 6, B. Riley analyst Alex Rygiel reiterated a Buy recommendation on Green Brick Partners, Inc. (NYSE:GRBK) but lowered the price target on the shares to $25 from $27. The analyst cited expected short-term weakness in deliveries caused by supply chain challenges for the price target cut.
Of the 12 hedge funds that were bullish on Green Brick Partners, Inc. (NYSE:GRBK) in the fourth quarter of 2021, Gavin Saitowitz and Cisco J. Del Valle’s Springbok Capital held a prominent position in the company, with 848,962 shares worth $25.7 million.
Here is what Black Bear Value Partners has to say about Green Brick Partners, Inc. (NASDAQ:GRBK) in its Q4 2021 investor letter:
“Green Brick Partners is a residential land developer and homebuilder. Most of their operations are in Texas, Georgia, and Florida. GRBK was formerly a private partnership between Jim Brickman and entities related to Greenlight Capital (managed by David Einhorn). David is currently the Chairman of the Board.
There is a long-term fundamental supply/demand imbalance in housing inventory. This is a direct result of underproduction of new homes amid a challenging mortgage financing environment over the last 10+ years since the Great Financial Crisis. Looking forward we should have increased housing demand from millennials as they enter the family-phase of life and desire more space. Rates are still near historic lows and people are desiring more personal space as remote work becomes more acceptable.
It is rare to be able to partner with an excellent operator and an excellent capital allocator. As evidenced by our investment in AutoNation, when you marry those 2 concepts you can wind up with a wonderful result. GRBK has been reinvesting their cash flow in additional lots/land inventory. This masks the earnings power of the company. The company is valued somewhere between 6-10x steady-state earnings and potentially even cheaper than that. I tend to be more conservative given the potential for rate rises and inflationary increases in development costs. We have high-quality stewards at both the operating and Board level.”
You can also take a look at 10 Best Undervalued Small-Cap Stocks According to Hedge Funds and 10 Oil & Gas Stocks to Invest In According to Rajiv Jain’s GQG Partners.
