Earlier this week, Greenlight Capital leader David Einhorn (Trades, Portfolio) disclosed his third-quarter portfolio.
The activist investor’s New York-based firm, which strives to generate long-term capital appreciation by taking an approach rooted in emphasizing intrinsic value, invests in companies that have the potential to achieve consistent returns and safeguard capital regardless of market conditions. Einhorn is also known for his short positions, among the most famous of which is Tesla Inc. (TSLA, Financial).
During the three months ended Sept. 30, Einhorn established five new holdings, sold out of 16 stocks and added to or trimmed a number of other existing investments. Among his most notable trades was a new position in iShares Silver Trust (SLV, Financial), an increased bet on The ODP Corp. (ODP, Financial), a reduction in the Concentrix Corp. (CNXC, Financial) holding and the divestment of the S&P 500 ETF Trust (SPY, Financial) and Reinvent Technology Partners (RTP, Financial) stakes.
IShares Silver Trust
The guru invested in 1.55 million shares of iShares Silver Trust (SLV, Financial), allocating 2.14% of the equity portfolio to the stake. The exchange-traded fund traded for an average price of $22.48 per share during the quarter.
Tracking the performance of the price of silver, the ETF was trading around $23.32 on Wednesday. The 14-day relative strength index of 60.01 indicates the stock is neither overbought nor oversold.
Other gurus with positions in the ETF include Baillie Gifford (Trades, Portfolio), Caxton Associates (Trades, Portfolio), Murray Stahl (Trades, Portfolio), Private Capital (Trades, Portfolio) and Ken Fisher (Trades, Portfolio).
ODP
Einhorn upped his position in ODP by 77.29%, picking up 500,000 shares. The transaction had an impact of 1.35% on the equity portfolio. Shares traded for an average price of $45.08 each during the quarter.
The guru now holds 1.15 million shares total, accounting for 3.09% of the equity portfolio and is now his ninth-largest holding. GuruFocus estimates he has lost 6.64% on the investment since establishing it in the first quarter of the year.
The Boca Raton, Florida-based company, which is a retailer of office supplies and business services, has a $2.14 billion market cap; its shares were trading around $41.85 on Wednesday with a price-earnings ratio of 27.36, a price-book ratio of 1.17 and a price-sales ratio of 0.23.
The GF Value Line suggests the stock is significantly overvalued currently based on its historical ratios, past performance and future earnings projections.
ODP’s financial strength and profitability were both rated 5 out of 10 by GuruFocus. While the company has adequate interest coverage, the Altman Z-Score of 2.16 implies it is under some pressure since its Sloan ratio is indicative of poor earnings quality. The return on invested capital, however, eclipses the weighted average cost of capital, so value is being created as the company grows.
The retailer also has a declining operating margin and returns on equity, assets and capital that underperform a majority of competitors. ODP also has a high Piotroski F-Score of 7 out of 9, meaning business conditions are healthy, but the predictability rank of one out of five stars is on watch as a result of revenue per share declining over the past five years. According to GuruFocus, companies with this rank return an average of 1.1% annually over a 10-year period.
Of the gurus invested in ODP, Hotchkis & Wiley has the largest stake with 4.85% of outstanding shares. Chuck Royce (Trades, Portfolio) and Barrow, Hanley, Mewhinney & Strauss also have own the stock.
Concentrix
Impacting the equity portfolio by -1.25%, the investor trimmed his Concentrix (CNXC, Financial) holding by 31.78%, selling 123,900 shares. The stock traded for an average per-share price of $165.80 on Wednesday.
He now holds 266,009 shares total, which represent 3.16% of the equity portfolio and is his eighth-largest holding. GuruFocus data shows he has gained an estimated 68.10% on the investment so far.
Headquartered in Fremont, California, the business services company, which specializes in customer engagement and business performance, has a market cap of $9.76 billion; its shares were trading around $187.05 on Wednesday with a price-earnings ratio of 28.32, a price-book ratio of 3.74 and a price-sales ratio of 1.79.
According to the Peter Lynch chart, the stock is overvalued currently.
GuruFocus rated Concentrix’s financial strength 6 out of 10 on the back of adequate interest coverage and a robust Altman Z-Score of 4.06. Value creation is also occurring since the ROIC exceeds the WACC.
The company’s profitability fared worse, scoring a 3 out of 10 rating despite having margins and returns that outperform over half of its industry peers. Concentrix is also supported by a moderate Piotroski F-Score of 6, indicating conditions are typical for a stable company.
With a 1.10% stake, Sarah Ketterer (Trades, Portfolio) is the company’s largest guru shareholder. Tweedy Browne (Trades, Portfolio), Steven Scruggs (Trades, Portfolio), Royce, Scott Black (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies and Pioneer Investments are also shareholders of Concentrix.
S&P 500 ETF Trust
The guru exited his 54,380-share investment in the SPDR S&P 500 ETF Trust (SPY, Financial), impacting the equity portfolio by -1.46%. The ETF traded for an average price of $439.92 per share during the quarter.
GuruFocus estimates he gained 5.77% on the short-lived investment.
The ETF, which tracks the price and yield performance of the S&P 500 Index, was trading around $468.34 on Wednesday. The 14-day relative strength index of 70.73 indicates the stock is overbought.
Among the gurus who currently have positions in the ETF are Ray Dalio (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Jana Partners (Trades, Portfolio), Warren Buffett (Trades, Portfolio), Al Gore (Trades, Portfolio), Keeley-Teton Advisors, LLC (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Mairs and Power (Trades, Portfolio), Stahl, Fisher, Simons’ firm, Mark Hillman (Trades, Portfolio) and Catherine Wood (Trades, Portfolio).
Reinvent Technology Partners
Einhorn’s 1.45 million-share stake in Reinvent Technology Partners (RTP, Financial) was dissolved following the close of its merger with Joby Aviation Inc. (JOBY, Financial) on Aug. 10, which had an impact of -0.91% on the equity portfolio. During the quarter, shares traded for an average price of $9.97 each.
Established in the first quarter of the year, he lost an estimated 9.31% on the investment according to GuruFocus.
The special purpose acquisition company announced the combination with Joby in February.
The Santa Cruz, California-based transportation company, which is developing a fully electric vertical take-off and landing aircraft for commercial transportation, has a $5.41 billion market cap; its shares were trading around $8.96 on Wednesday with a price-earnings ratio of 9,149.53.
Since its public debut on Aug. 11, the stock has tumbled nearly 21%.
GuruFocus rated the company’s financial strength 5 out of 10.
Seth Klarman (Trades, Portfolio) has the largest stake in the newly public company with 1.66% of its outstanding shares. Baillie Gifford (Trades, Portfolio), Chase Coleman (Trades, Portfolio), Wood, Louis Moore Bacon (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) also see value in Joby.
Additional trades and portfolio composition
During the quarter, Einhorn also entered positions in Freyr Battery (FREY, Financial), Victoria’s Secret & Co. (VSCO, Financial), Waverly Capital Acquisition Corp. 1 (WAVC.U, Financial) and Stryve Foods Inc. (SNAX, Financial). In addition, he boosted his holdings of Brighthouse Financial Inc. (BHF, Financial), Tech Resources Ltd. (TECK, Financial) and LivaNova PLC (LIVN, Financial).
The guru’s $1.49 billion equity portfolio, which is composed of 58 stocks, is most heavily invested in the consumer cyclical sector with a weight of 32.22%.
In 2020, Greenlight significantly underperformed the S&P 500 with a return of 5.2%. The index posted an 18.4% return.
