Oil States International, Inc. (OIS), CONN’S, Inc. (CONN), Babcock & Wilcox Co (BWC): David Einhorn’s Greenlight Capital’s Top Small-Cap Picks

We have come to realize that the most popular small-cap picks ($1 billion – $5 billion market cap) amongst hedge funds have historically outperformed the wider market by 18 percentage points. Thus, looking into hedge fund holdings can provide us with great invesotment ideas. In this article we will look into David Einhorn’s Greenlight Capital’s top small-cap picks, for you to decide if any of them are worthy of your consideration as investments.

Mr. Einhorn seems to love small-cap companies. Amongst his 20 most valuable long equity positions, 6 are placed at companies with market caps below $4 billion. The fund’s biggest small-cap bet is the on the Oil States International, Inc. (NYSE:OIS), a $3.35 billion market cap worldwide provider of specialty products and services to oil and gas drilling and production companies. Although Greenlight Capital’s position in Oil States International, Inc. (NYSE:OIS) remained unchanged over the last reported quarter, a series of stock sales that Barry Rosenstein’s Jana Partners made over June have transformed Mr. Einhorn’s fund in the largest hedge fund shareholder of Oil States International, Inc. (NYSE:OIS) –amongst the 700 funds that we track. Its 2.75 million shares are worth more than $270 million, and account for roughly 4% of its total equity portfolio’s value. Following the June disposals, Jana Partners owns 2.6 million shares, down from the 6.1 million shares held by the end of Q1.

GREENLIGHT CAPITAL

Second in this list is CONN’S, Inc. (NASDAQ:CONN), a $1.8 billion market cap specialty retailer of branded consumer durable goods, and a provider of consumer credit, oriented at supporting its customers’ purchases. As reported in late April, this was a newcomer to Mr. Einhorn’s portfolio in Q1. In his 2014 Q1 Investor Letter, the hedge fund manager stated:

“CONN’S, Inc. (NASDAQ:CONN) is a specialty retailer of appliances, furniture, mattresses and electronics with 79 locations in Texas and the Southwest. CONN finances 77% of customer purchases through its proprietary subprime credit portfolio. In February, the company announced 33% comparable store sales growth in Q4 with strong gross margins. However, it also announced increased credit losses and reduced earnings guidance from a range of $3.80-$4.00 to a range of $3.40-$3.70 for calendar 2014. Given the market’s past experience with deterioration in subprime credit, the stock reaction was severe: The price fell from $79 at the start of the year to $32 on the news. We believe that this is a retailer with 15-20% unit growth and current double digit comparable store sales growth, and that the market overreacted to moderately bad news. We acquired shares at an average price of $35.49 and they ended the quarter at $38.85.”

Greenlight Capital last declared owning 3.3 million shares, worth more than $128 million. In addition, Christian Leone’s Luxor Capital Group holds 3.499 million shares, which account for more than 2.5% of its total equity portfolio. CONN’S, Inc. (NASDAQ:CONN) is also a newcomer at Luxor Capital’s equity portfolio.

Babcock & Wilcox Co (NYSE:BWC) is a $3.6 billion market cap technology innovator in power generation systems, a specialty manufacturer of nuclear components and a service provider, of which Greenlight Capital owns 3.829 million shares, worth more than $127 million by the end of Q1. While the fund slightly decreased its stake in Babcock & Wilcox Co (NYSE:BWC) over the last reported quarter, Clifton S. Robbins’ Blue Harbour Group almost quintupled its bets over the period, and continued to buy its stock in Q2. The fund last declared ownership of 6.62 million shares of Babcock & Wilcox Co (NYSE:BWC), a 6.0% -activist- stake.

Next is McDermott International (NYSE:MDR), a $1.9 billion market cap engineering, procurement, construction and installation company, engaged on designing and executing complex offshore oil and gas projects. After almost doubling his stakes over Q1, Mr. Einhorn is the largest hedge fund shareholder of record at the company. His 14.04 million shares, worth more than $109 million, account for more than 1.6% of his total equity portfolio. The second largest hedge fund investor of McDermott International (NYSE:MDR) trails Greenlight from far behind. We’re talking about Mark Mcgoldrick and Jason Maynard’s Mount Kellett Capital Management, which started a position over Q1 and now owns 4.497 million shares of McDermott International (NYSE:MDR).

Finally, there’s Take Two Interactive Software Inc. (NASDAQ:TTWO), a $2.2 billion market cap developer, marketer and publisher of interactive entertainment for consumers, responsible for hit game sagas like Grand Theft Auto. Once again, Greenlight Capital is the largest hedge fund shareholder of Take Two Interactive Software Inc. (NASDAQ:TTWO), with 4.8 million shares -after a 15% increase in its stake over Q1, the fund’s position is worth more than $105 million. Another prominent investor betting on this company is Ken Griffin (Citadel Investment Group), who recently more than doubled his exposure to the gaming company, and last declared owning 3.895 million shares of Take Two Interactive Software Inc. (NASDAQ:TTWO).

Disclosure: Javier Hasse holds no position in any stocks mentioned

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!