David Einhorn is one of the most widely-followed investors on the Street and even though his fund Greenlight Capital made its name mainly on the back of its profitable short bets (such as the one against Lehman Brothers before its collapse) its long positions are also scrutinized. Yesterday Greenlight released its letter to investors for the first quarter. As you probably already know, Greenlight’s funds declined by 1.7% during the first quarter net of fees. We have already covered some highlights from the letter, focusing on some of Einhorn’s long-term investments, such as Apple Inc. (NASDAQ:AAPL), Sunedison Inc (NYSE:SUNE) and Micron Technology, Inc. (NASDAQ:MU). Let’s take a look at three other companies in which Greenlight initiated new positions, according to the letter (download the full text).
A surprise was the new stake in General Motors Company (NYSE:GM), in which Greenlight previously held around 17.05 million shares, but closed the stake during the first quarter of 2015. The fund has not disclosed the size of the new position, but said that it bought the shares at $34.62 per unit.
“2015 should be a better year for GM: the company is a year closer to eliminating its losses in Europe; low gas prices should stimulate demand for its highly profitable SUV and light truck product lines; raw materials costs are low; and we believe that the worst of the product recalls is behind them,” the letter stated.
Among other reasons for going bullish on General Motors Company (NYSE:GM), Greenlight stated the company’s plans to buy back shares, as well as the fact that it trades less than 8 times its consensus estimate for 2015. Aside from Greenlight, two other big investors that are bullish on General Motors Company (NYSE:GM) are billionaires Warren Buffett and David Tepper.
Another company in which Greenlight said it initiated a new position is AerCap Holdings N.V. (NYSE:AER), although the latest 13F filing also showed a long position that has a shared investment discretion. Among the reasons for initiating a stake in AerCap, Greenlight mentioned last year’s deal with AIG, under the terms of which AerCap bought its aircraft leasing business, which raised its total fleet to more than 1,300 units from 300.
“The combined business will benefit from AER’s lower tax rate and funding costs as well as SG&A and operating efficiencies. The deal also provided AER with ILFC’s attractively priced order book of next-generation planes,” Greenlight said.
In addition, the investor added that AerCap Holdings N.V. (NYSE:AER) has good management and can post double-digit earnings growth in the next several years. Meanwhile, AerCap’s stock gained 12% during the first quarter of 2015, benefiting investors like Barry Rosenstein‘s JANA Partners and Lee Ainslie’s Maverick Capital, which disclosed large long positions in the company as of the end of 2014.
Chicago Bridge & Iron Company N.V. (NYSE:CBI) is another new addition to Greenlight’s equity portfolio, according to the letter. The stock lost over 40% over the last 52 weeks due to the engineering company’s exposure to energy, which took a hit from the declining oil prices. Greenlight took the opportunity to buy shares at $42.93 per unit, which represents eight times its expected earnings for the current year.
“We believe that energy prices may very well stay lower for longer, which might eventually lead to a smaller market opportunity. CBI has a sizeable backlog of projects that should support earnings for several years. We also believe that some market participants are overly concerned about costs associated with two nuclear facilities under construction that are likely to be completed late and over budget. While the delays and costs are real, we believe the market is vastly overestimating how much of those costs will be borne by CBI as opposed to its construction partner (Westinghouse) and consumers, who will see it in their energy bills,” Greenlight also said.
Chicago Bridge & Iron Company N.V. (NYSE:CBI) was also mentioned in Greenlight’s latest 13F filing, with the stake containing 2.94 million shares with shared investment discretion. The largest shareholder of Chicago Bridge & Iron Company N.V. (NYSE:CBI) among institutional investors is Warren Buffett’s Berkshire Hathaway, which owns 10.70 million shares as of the end of 2014.
Among other things, Greenlight also mentioned that it has reduced its net exposure to 14% from 30%. The fund stated its bull case that “equities haven’t yet reached bubble levels at a time when fixed income is behaving bubbly, and that the Fed will support the market.” The investor also added that it closed several positions, including Aetna Inc (NYSE:AET), Safeway, Freescale Semiconductor, and Lorillard Inc. (NYSE:LO), most of which were generating a significant negative internal rate of return.
Disclosure: None
