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).
The guru, whose fund is up nearly 18% year to date, has been bearish on stocks this year due to the Federal Reserve raising interest rates in order to fight inflation. Further, in a recent interview with Bloomberg, he said he is not sure value investing will ever make a comeback.
During the three months ended Sept. 30, Einhorn’s 13F filing shows he established two new holdings, sold out of seven stocks and added to or trimmed a number of other existing investments. His most notable trades included a new position in Twitter Inc. (TWTR, Financial), a reduced bet on Global Payments Inc. (GPN, Financial) and the divestment of Atlas Air Worldwide Holdings Inc. (AAWW, Financial), The Chemours Co. (CC, Financial) and Warner Bros. Discovery Inc. (WBD, Financial).
Investors should be aware 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
Seeing an opportunity in Elon Musk’s $44 billion bid to buy Twitter Inc. (TWTR, Financial), the guru invested in 4.28 million shares, allocating 13.31% of the equity portfolio to the stake. The stock traded for an average price of $40.71 per share during the quarter.
It became his second-largest holding before the deal officially closed in October. He previously sold out of the stock in the first quarter of the year.
According to the terms of the agreement, shareholders of the now-private social media company, which is based in San Francisco, received $54.20 per share.
Before being delisted on Nov. 8, the company had a $41.09 billion market cap; its shares closed at $53.70 on its final day of trading, which was Oct. 27, with a price-book ratio of 6.98 and a price-sales ratio of 8.22.
The stock had gained approximately 25.88% for the year to date.
Of the gurus invested in Twitter before it went private, Carl Icahn (Trades, Portfolio) had the largest stake with 1.64% of its outstanding shares. Daniel Loeb (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Michael Price (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Hotchkis & Wiley, PRIMECAP Management (Trades, Portfolio), Ray Dalio (Trades, Portfolio)’s Bridgewater Associates, Louis Moore Bacon (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio) and Mario Gabelli (Trades, Portfolio) also took advantage of the buyout.
Global Payments
Einhorn curbed his position in Global Payments (GPN, Financial) by 46.99%, selling 242,200 shares. The transaction had an impact of -2.08% on the equity portfolio. Shares traded for an average price of $123.34 each during the quarter.
The guru now holds 273,240 shares total, accounting for 2.09% of the equity portfolio. GuruFocus estimates he has lost 20.29% on the investment, which used to be his sixth-largest holding, since establishing it in the fourth quarter of 2021.
The payment processing and software solutions company, which is headquartered in Atlanta, has a market cap of $26.27 billion; its shares were trading around $96.93 on Thursday with a price-earnings ratio of 441.57, a price-book ratio of 1.16 and a price-sales ratio of 3.07.
The GF Value Line suggests the stock, while undervalued, is currently a possible value trap based on its historical ratios, past financial performance and analysts’ future earnings projections. As such, potential investors should do thorough research before making a decision.
The company also has a GF Score of 88 out of 100, receiving high ratings for growth, profitability and momentum and middling marks for financial strength and GF Value. As a result, Global Payments has good outperformance potential.
With a 0.80% stake, Larry Robbins (Trades, Portfolio) is Global Payments’ largest guru shareholder. Bill Nygren (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio) and the Parnassus Endeavor Fund (Trades, Portfolio) also have notable holdings.
Atlas Air
The investor exited his 1.33 million-share stake in Atlas Air (AAWW, Financial), impacting the equity portfolio by -6.37%. During the quarter, the stock traded for an average per-share price of $88.20.
GuruFocus data shows Einhorn gained 84.12% on the investment, which was previously his third-largest holding, over its lifetime.
The Purchase, New York-based aircraft leasing company has a $2.85 billion market cap; its shares were trading around $100.20 on Thursday with a price-earnings ratio of 8.13, a price-book ratio of 0.97 and a price-sales ratio of 0.75.
According to the GF Value Line, the stock is significantly overvalued currently.
The company also has a GF Score of 70, driven by high ranks for profitability and growth, middling marks for financial strength and low ratings for GF Value and momentum. As such, Atlas Air has poor future performance potential.
Donald Smith & Co. is now Atlas Air’s largest guru shareholder with 3.17% of its outstanding shares. Other guru investors include Simons’ firm, Steven Scruggs (Trades, Portfolio), Hotchkis & Wiley, Bacon, John Hussman (Trades, Portfolio), Chuck Royce (Trades, Portfolio) and Gabelli.
Chemours
With an impact of -1.74% on the equity portfolio, the guru sold his 700,000 remaining shares of Chemours (CC, Financial). The stock traded for an average price of $32.99 per share during the quarter.
GuruFocus found Einhorn gained around 126.89% on the investment.
Spun off of DuPont (DD, Financial) in 2015, the chemical company headquartered in Wilmington, Delaware has a market cap of $4.90 billion; its shares were trading around $32.50 on Thursday with a price-earnings ratio of 5.8, a price-book ratio of 3.87 and a price-sales ratio of 0.74.
Based on the GF Value Line, the stock appears to be fairly valued currently.
The GF Score of 80 also indicates the company is likely to have average performance going forward. It raked in high points for profitability and momentum, but only middling marks for growth, financial strength and GF Value.
Of the gurus invested in Chemours, Simons’ firm has the largest position with 0.33% of its outstanding shares. Jones, Greenblatt and First Eagle Investment (Trades, Portfolio) also own the stock.
Warner Bros. Discovery
Impacting the equity portfolio by -1.72%, Loeb closed his 1.65 million-shares stake in Warner Bros. Discovery (WBD, Financial). Shares traded for an average price of $13.59 each during the quarter.
GuruFocus research shows he lost approximately 48.69% on the investment.
The New York-based media and entertainment company, which was formed through the merger of AT&T’s (T, Financial) WarnerMedia assets and Discovery Inc., has a $26.62 billion market cap; its shares were trading around $10.96 on Thursday with a price-book ratio of 0.55 and a price-sales ratio of 0.62.
The GF Value Line suggests the stock, while undervalued, is a possible value trap, so potential investors should do thorough research before making a decision.
The GF Score of 82 indicates the company has good outperformance potential based on high grades for profitability and growth, middling marks for GF Value and momentum and low points for financial strength.
With a 1.32% stake, Hotchkis & Wiley is the company’s largest guru shareholder. Other gurus with large positions in Warner Bros. Discovery include Seth Klarman (Trades, Portfolio), Mason Hawkins (Trades, Portfolio), the Smead Value Fund (Trades, Portfolio), Yacktman Asset Management (Trades, Portfolio) and Gabelli.
Additional trades and portfolio composition
During the quarter, Einhorn also entered a position in Intel Corp. (INTC, Financial), added to his LivaNova PLC (LIVN, Financial) holding and whittled down the Change Healthcare Inc. (CHNG, Financial) investment.
The guru’s $1.41 billion equity portfolio, which is composed of 42 stocks, is most heavily invested in the consumer cyclical sector with a weight of 35.24%.
According to GuruFocus, Greenlight Capital posted a return on 7.5% in 2021, significantly underperforming the S&P 500 Index’s 28.7% return.
