David Einhorn (Trades, Portfolio)'s Greenlight Capital did not perform well in first-quarter 2018. The guru lost no less than 13.6%. Einhorn told investors losses were broad but generally shallow.Ă‚
As a result, I reviewed Einhorn's top three holdings.Ă‚
General Motors
One of the positions that really hurt Einhorn was General Motors (GM, Financial), which underperformed the market by around 6%, but recently bounced back.
GM’s fundamentals appear favorable as employment is strong, tax cuts are helping customers, used car values are performing well versus expectations and industry scrappage rates are increasing. GM has lean inventory and a product line-up that is gaining share with pricing power. We just don’t see what the market is saying, and we believe the automaker is more likely to exceed near and intermediate-term forecasts than to disappoint. Also, the company plans to return about 10% of its market capitalization to shareholders in dividends and buybacks in 2018. Time will tell whether the market is correctly sniffing out incrementally tougher prospects for GM to justify the multiple compression.
AerCap Holdings
AerCap Holdings (AER, Financial), which leases airplanes, trades at about 8 times earnings. The company also bought back an impressive 32% of its shares over the last 33 months. According to CEO Aengus Kelly, its competitors will be in trouble because the company is growing and is a specialist, while general banks are not. AerCap has an advantage because it performs better in refurbishing and resale. Kelly also doesn't like acquisitions. Sounds like a great CEO to me. Here is his recent interview with Bloomberg:
Brighthouse Financial
Brighthouse Financial (BHF, Financial) is a spinoff from MetLife (MET, Financial). Einhorn really likes the company. It is a monster position for the fund, after General Motors. According to Einhorn:
"Brighthouse Financials (BHF, Financial) has made signficant progress towards achieving its objectives for capital return; it will likely reach its capitalization targets well in advance of the 2020 expectations set at the time of the spin-off. BHF trades at 48% of book value and under 6x earnings."
Brighthouse is a large insurance company, though it's not even a third of the size of its former parent company:
MetLife trades at approximately 0.8 times book value, so it's hard to argue Brighthouse is not doing much worse. At least, Einhorn doesn't think so.
Disclosure: No positions.
