Was Einhorn Wrong or Early on Martin Marietta Materials?

Page 1 of 2

GREENLIGHT CAPITALBillionaire David Einhorn of Greenlight Capital is closely followed, possibly most closely when he gives public presentations at investor conferences. See Einhorn’s most recent stock picks. He famously recommended shorting Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) in October 2011, before the stock began plummeting; he had also been a public critic and short seller of Lehman Brothers in late 2007 and 2008. Einhorn led his presentation at the mid-May Ira Sohn Conference with a short thesis on Martin Marietta Materials, Inc. (NYSE:MLM). The stock is up 22% since then, easily beating the market. The stock had been declining quite a bit in early May, so it might not be entirely fair to measure its performance from the conference date, but even if we use the beginning of May as our baseline Martin Marietta is up 11% against a flat market.

The core of Einhorn’s thesis was simple. The stock was trailing at a P/E of more than 30, implying that the market was expecting strong growth, but net income should actually be coming down as the construction materials company (providing products such as limestone, granite, sand, and gravel) lost the benefits of short term fiscal stimulus. Business has still been good however, and in the third quarter of the year Martin Marietta Materials, Inc. experienced an 18% increase in revenue compared to the same period in 2011. Earnings were up 28%. Net income was actually down in the first nine months of 2012 versus a year ago, but that is more than accounted for by an unusual amount of business development costs in the first half of this year.

Martin Marietta’s valuation does look high, however, and while we don’t have any information as to whether or not Einhorn is still short (short positions are not disclosed in 13F filings) it’s possible that Greenlight was merely early. The forward P/E is 28, and that incorporates high growth expectations on the sell side for 2013. Even over the longer term analyst consensus is for fairly low earnings in relation to the stock price, with a five-year PEG ratio of 4. There have been significant insider sales at Martin Marietta, and the most recent data shows that 18% of outstanding shares are held short.

Page 1 of 2
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

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

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!