Greenlight Capital, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly return of -2.6% was recorded by the fund for the third quarter of 2021, compared to the 0.6% for the S&P 500 index. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Greenlight Capital, in its Q3 2021 investor letter, mentioned Green Brick Partners, Inc. (NASDAQ: GRBK) and discussed its stance on the firm. Green Brick Partners, Inc. is a Plano, Texas-based operative builders operation company with a $1.2 billion market capitalization. GRBK delivered a 10.58% return since the beginning of the year, while its 12-month returns are up by 39.74%. The stock closed at $25.39 per share on October 22, 2021.
Here is what Greenlight Capital has to say about Green Brick Partners, Inc. in its Q3 2021 investor letter:
“Let’s start with Green Brick Partners (GRBK). The shares declined 9.8% this quarter from $22.74 to $20.52. In the June quarter, GRBK earned $1.02 per share (up 54% from the prior year and up 260% from 2019), easily exceeding analyst estimates of $0.85 per share. 2021 full-year consensus estimates rose from $3.34 to $3.68 per share and 2022 estimates rose from $3.80 per share to $4.06.
In August, the company held an analyst day where it highlighted that revenues and pretax income have grown 28% and 44% per year compounded since its 2014 IPO. Recent growth has been even faster. The company now generates a 30% ROE. GRBK highlighted that it has a very favorable land and market position that positions it for continued success. Nonetheless, the P/E on 2021 earnings shrank from an undemanding 6.8x to a very hard to
explain 5.6x.Yes, we have heard a bear thesis on housing that amounts to claims that overbuilding combined with higher prices will drive future buyers away. From what we can see, there is no sign of this. Demand remains very strong, and with rents rising quickly, owning is becoming a more attractive option.
The real problem is supply chain shortages, which are extending industry build times and making it hard to complete houses. To the extent that this pushes closings out, it merely derisks the forward year estimates and indicates that current results are likely far from peak and therefore deserve more respect from the market…” (Click here to see the full text)
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Based on our calculations, Green Brick Partners, Inc. (NASDAQ: GRBK) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. GRBK was in 14 hedge fund portfolios at the end of the first half of 2021, compared to 18 funds in the previous quarter. Green Brick Partners, Inc. (NASDAQ: GRBK) delivered a 9.63% return in the past 3 months.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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Disclosure: None. This article is originally published at Insider Monkey.
