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Holly LaFon
Holly LaFon
Articles (9134)  | Author's Website |

David Einhorn Buys Altice USA and BT Group in 3rd Quarter

Overview of Einhorn's new investments

November 08, 2018 | About:

Greenlight Re Chairman David Einhorn (Trades, Portfolio) said Wednesday that he started two positions, Altice USA (NYSE:ATUS) and BT Group PLC (NYSE:BT), in the third quarter.

Typically, fund managers wait to disclose buys and sales until the SEC-required date of 45 days after the end of the quarter, but sometimes they let investors know some of their dealings through interviews or letters. Einhorn made public the information during his third-quarter conference call to discuss another dismal quarter in which his fund slid a further 8.4%, with a loss of 21.4% for the year through October.

Though details regarding the amount of shares he purchase will remain unknown until his portfolio release, Einhorn described the Alrice USA investment as “medium-sized.” The New York-based company is the seventh-largest video service provider in the U.S. by number of subscribers. The cable television operator operates in 21 states and has a $13.89 bill market cap.

Einhorn purchased Altice USA’s shares as they declined 16% for the year through the third quarter. The stock has plunged roughly 52% from its price above $30 per share at the company’s initial public offering in June 2017.

A positive earnings report on Monday electrified the shares, however, sending them up 13.4% from their close that day to $18.85 at close Wednesday.

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Altice USA reported what CEO Dexter Goei called the company’s “best financial performance yet,” citing increased subscribers, revenue, margin and free cash flow growth.

“We are delivering on our differentiated investment thesis anchored in infrastructure-based investment to future-proof our business, to enhance the customer experience and services offered, and to reduce costs over the long-term,” Goei said.

Altice USA revenue rose 4.1% from the third quarter of the prior year to $2.42 billion on growth in its residential and business segments and in advertising. Net income reached $33.74 million, or 4 cents per diluted share, up from a loss of $192.98 million, or a loss of 26 per share, a year ago.

The company also has a price-earnings ratio near a one-year low at 5.56 and price-sales ratio near a two-year low at 1.19. Its price-book ratio is 3.6.

Einhorn said he believe the company “trades at a discount to its pure-play cable peers despite better free cash flow conversion and a better new investment opportunity profile.”

The stock has attracted a number of investors GuruFocus tracks, including Paul Tudor Jones (Trades, Portfolio), Jana Partners (Trades, Portfolio), George Soros (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio), who each established a new position during the second quarter.

Second on Einhorn’s buy list, BT Group (NYSE:BT) stock had been in decline since November 2015. The shares had tumbled roughly 17% for the year through the end of the third quarter and by almost 55% from their 15-year peak in November. They traded for $249.25 Wednesday, down 0.7% for the day and 8.7% for the year to date.

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The company, which Einhorn called “the incumbent telecom operator in the U.K.,” offers fixed-line, mobile and broadband services in the U.K. and 180 countries. He also named several reasons he found the stock attractive.

“The company is paying an attractive 6% dividend and we believe that sentiment will turn incrementally more positive as BT exceeds reduced earnings expectations,” Einhorn said in his call with analysts.

BT Group has paid a semi-annual dividend since 2002 after a brief interruption during the dot-com bubble of 2000 and has increased its payout for the past six years. Its five-year dividend growth rate is 12.5%.

For the quarter ended Sept. 30, which BT Group reported Nov. 1, the company saw revenue decline 2% year-over-year to £11.59 billion as it faced regulated price reductions and weakness in its enterprise businesses. Profit before tax increased 24% to £1.34 billion primarily due to higher volume and mix of high-end smartphones in its consumer segment in addition to reduced costs as part of its restructuring.

In May, the company announced that it would cut jobs and relocate from its central London headquarters in an effort to save £1.5 billion over the next three years. The moves come as part of the company’s restructuring project launched in July 2017.

Einhorn’s largest positions at the end if the second quarter were General Motors Co. (NYSE:GM), Brighthouse Financial Inc. (NASDAQ:BHF) and Mylan NV (NASDAQ:MYL). He should announced his third-quarter portfolio in mid-November.

See David Einhorn (Trades, Portfolio)'s portfolio here.

Read more here:

What Went Wrong for This Fund Manager?

Tesla's 3rd Quarter Is as Good as It Will Ever Get

Einhorn’s General Motors Soars on Strong 3rd Quarter Sales Growth

About the author:

Holly LaFon
I'm a financial journalist with a master of science in journalism from Medill at Northwestern University.

Visit Holly LaFon's Website


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