David Einhorn of Greenlight Capital filed a Form 13 yesterday disclosing the hedge funds long equity portfolio at the end of the second quarter. He believes that an investment approach emphasizing intrinsic value will achieve consistent absolute investment returns and safeguard capital regardless of market conditions. Einhorn is a noted activist investor, taking positions in companies and then pushing management to implement changes. He has been very successful in his strategy with Greenlight Capital providing annualized returns of 19.5 percent since its founding in 1996. The hedge fund manager added five new stock positions in the second quarter: AerCap Holdings (AER), Time (TIME), NorthStar Realty Finance (NRF), Chemtura (CHMT), and DSW (DSW).
AerCap Holdings NV (AER)
Einhorn purchased 2,225,000 shares of AerCap Holdings, whose share price averaged $44.19 during the quarter. The new position equates to 1.4 percent of the portfolio.
AerCap is engaged in leasing, financing, selling and managing commercial aircraft and engines throughout the world. The top three countries for the leases are the United States (17.3%), Russia (9.6%) and the United Kingdom (8.4%) according to the Form 20-F filed for full year 2013. Since then, AerCap has acquired International Lease Finance Corporation. The company has a market cap of $10.12 billion. The stock closed at $47.64 on Thursday, August 14, with a P/E ratio of 19.40, P/B ratio of 2.20, and P/S ratio of 5.20. The stock is overvalued in relation to its 5-year medians of its financial ratios of P/E at 9.7, P/B at 0.9, and P/S at 1.7.
Time Inc (TIME)
Einhorn purchased 3,350,000 shares of Time, whose share price averaged $22.78 during the quarter. The new position equates to 1.1 percent of the portfolio.
Time Inc is the largest magazine publisher in the United States based on both readership and print advertising revenues and the largest publisher in the U.K. based on print newsstand revenues. It publishes 23 magazines for print in the United States including People, Sports Illustrated, Time, InStyle, Travel & Leisure and Fortune. It publishes over 70 magazines outside of the United States. The company was recently spun off from Time Warner in May. The company has a market cap of $2.59 billion. The stock closed at $23.34 on Thursday, August 14, with a P/E ratio of 19.4, P/B ratio of 0.92 and P/S ratio of 0.76. The stock is undervalued as long as the company can maintain its book value and have positive earnings. The bar is set low because of its P/B ratio below 1. Analysts are projecting a forward P/E of 15.35, indicating that earnings are expected to grow.
Northstar Realty Finance Corp (NRF)
Einhorn purchased 4,539,575 shares of Northstar Realty Finance, whose share price averaged $15.72 during the quarter. The new position equates to 1.1 percent of the portfolio.
Northstar Realty is a diversified commercial real estate investment and asset management company. Its investments may take the form of acquiring real estate, originating or acquiring senior or subordinate loans, as well as pursuing opportunistic commercial real estate investments, both in the United States and internationally. The company has a market cap of $3.57 billion. The stock closed at $17.78 on Thursday, August 14, with a P/B ratio of 1.60 and P/S ratio of 3.66. Northstar Realty does not have earnings to generate a P/E ratio, although it has a dividend yield of 10.8 percent. The stock is overvalued in relation to its 5-year median ratios of P/B and P/S at 0.5 and 4.2.
Chemtura Corp (CHMT)
Einhorn purchased 2,921,428 shares of Chemtura, whose share price averaged $24.62 during the quarter. The new position equates to 1.1 percent of the portfolio.
Chemtura is a leading diversified global developer, manufacturer and marker of performance-driven engineered specialty chemicals. It operates through Industrial Performance Products, Industrial Engineered Products, and Chemtura AgroSolutions segments. The company has a market cap of $2.2 billion. The stock closed at $24.16 on Thursday, August 14, with a P/B ratio of 2.40 and P/S ratio of 1.02. Chemtura does not have earnings to generate a P/E ratio. The stock is overpriced in relation to its 5-year median ratios of P/B and P/S at 1.7 and 0.5.
DSW Inc (DSW)
Einhorn purchased 181,574 shares of DSW, whose share price averaged $31.59 during the quarter. The new postion equates to 0.07 percent of the portfolio.
DSW is focused on providing the best shoe shopping experience possible with thousands of shoes for men and women in 394 stores nationwide. The stores average approximately 22,000 square feet and carry approximately 23,000 pairs of shoes. The stock closed at $27.47 on Thursday, August 14, with a P/E ratio of 16.10, P/B ratio of 2.50, and P/S ratio of 1.07. The dividend yield of DSW is 2.28 percent. The stock is undervalued in relation to its 5-year median financial ratios of P/E, P/B, and P/S at 38.9, 4.4 and 1.7.
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