Undervalued Stocks in Einhorn's Portfolio
Which is David Einhorn's strategy? He believes an investment approach emphasizing intrinsic value will achieve consistent absolute investment returns and safeguard capital regardless of market conditions. Einhorn has made his fame for his long-term performance and his successful short selling.
Mark Coffer, an S&P analyst pointed out that “Einhorn is best-known value investors in the game today. His activism and will to take positions in the company has turned him into a role model.”
Apart from Greenlight Capital, David also serves on the boards of Hillel: The Foundation for Jewish Campus Life, The Michael J. Fox Foundation for Parkinson’s Research, and the Robin Hood Foundation.
Here are some of his low P/E stocks:
HCA Holdings Inc. (HCA):
P/E of just 4.62
HCA Inc. is a GM, non-governmental hospital in the U.S. providing health care and related services. The company operates a network of acute care hospitals, outpatient facilities, clinics and other patient care delivery settings. The company also owns and manages freestanding surgery centers, diagnostic and imaging centers, radiation and oncology therapy centers, rehabilitation and physical therapy centers, and various other facilities.
In terms of last quarter results, it reported adjustment EBITDA growth of 4% or $1.412 billion. From an operations perspective, its earnings were achieved primarily due to strong patient volumes and expense control despite a continued softness in revenues per unit.
With the 65-and older population, HCA should realize strong admission growth. In addition, as the largest private hospital, HCA has more scale advantages than competitors. Consolidating IT infrastructure and back-office services allows HCA to keep costs low.
Einhorn bought the stock recently in a price very close to the current one
General Motors Co.(GM):
P/E of just 5.67
General Motors Company emerged from the bankruptcy of General Motors Corporation (old GM) in July 2009. GM has 12 brands and operates under five segments: GM North America, GM Europe, GM South America, GM International Operations and GM Financial.
Financially speaking, GM is recovering from the 2009 low in the sale of vehicles. . Higher prices allow GM to get more margins per vehicle. Indeed, new models such as Buick's LaCrosse and Regal and the Chevrolet Cruze have been very successful and models like Chevrolet's Malibu and Sonic show that GM can make a vehicle to compete directly with the models produced by Japanese and European automakers.
GM already is a top player in critical emerging markets such as Brazil and China. It sells nearly 70% of its vehicles outside North America.
Einhorn added to his position in the recent quarter.
LyondellBasell Industries NV (LYB):
P/E of just 6.25
LyondellBasell Industries is a manufactures chemicals and derivatives. It also operates as a refiner of heavy high-sulfur crude oil produce and is engaged in the marketing and selling of polyolefins, polypropylene and polyethylene resins. LyondellBasell products and technologies are used to make items that improve the quality of life for people around the world.
The last quarter was the best quarter ever. Net income was $895 million and EBITDA exceeded $1.7 billion. This brings it year-to-date EBITDA to $4.7 billion and earnings per share to $4.12.
Lyondell Basel has been a good investment and will continue to be a good buy because of an improved financial standing, a sound business model, and most importantly, an effective recovery from bankruptcy that did not lose the company significant market share.
Marathon Oil Corp (MRO):
P/E of just 7.20
Marathon Oil is an independent exploration and production company with activities in the United States, Angola, Indonesia, and Norway. Marathon has not been credited with expansion of its exploration and production business. As an independent E&P, it should bring in a greater valuation.
Exploration success in the Gulf of Mexico, Kurdistan, and Indonesia could provide additional long-term growth and investment in shale plays should move Marathon away from large projects, which it has struggled with in the past.
First Solar, Inc (FSLR).:
P/E of just 5.8
First Solar manufactures solar modules and constructs turnkey solar systems. Presently, First Solar has the strongest balance sheet of any company in the industry. FLSR holds meaningful intellectual property, while also designing and custom-building its own production lines.
Furthermore, it has great flexibility in acquiring companies and rights to projects thanks to its financial situation. First Solar has seen its project installation costs fall by almost 40% since 2009, and the company now has the cheapest non-module costs in the industry at the large-scale project level. Though unsustainable, this additional cost edge will create material earnings upside as the company builds out its current pipeline of utility-scale projects during 2011-13.
FSLR called my attention when I checked the earnings correlated FAST Graphs. It shows that FSLR is trading far away from its Normal P/E ratio (blue line) and its earnings justified valuation (orange line0.