Greenlight Capital Fund recently released its Q1 2020 Investor Letter, a copy of which you can download below. The fund posted a return of -21.5% for the quarter, underperforming its benchmark, the S&P 500 Index which returned -19.60% in the same quarter. You should check out Greenlight Capital’s top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash. There weren’t a lot of funds who could deliver these kinds of returns without shorting the market or using aggressive put options.
In the said letter, Greenlight Capital highlighted a few stocks and Brighthouse Financial Inc. (NASDAQ:BHF) is one of them. Brighthouse Financial provides annuities and life insurance in the US. Year-to-date, BHF stock lost 26.2% and on May 15th it had a closing price of $26.68. Its market cap is of $2.69 billion. Here is what Greenlight Capital said:
“BHF: The 2019 S&P 500 melt-up created a large unexpected gain. As a result, BHF ended the year with a stunning 550% risk-based capital ratio, implying $2-3 billion in excess capital. Then, before the market fell, BHF changed its hedging strategy to lock in last year’s equity gains and take dramatically less market risk going forward. The big gain combined with a lower risk strategy enabled BHF to announce a $1.25 billion dividend to the holding company, prospectively bringing holding company cash to $2 billion. Today, BHF is worth a total of… $2.5 billion. That’s right – all of the rest of the company is close to free. We expect the hedges will come through, and BHF will likely report GAAP earnings in the first quarter that approach its current market cap.3 BHF is not in financial distress. Its investment grade-rated 2027 bonds trade at 96% to yield 4.4%. The company has a large buyback in place, and could easily retire 25% or more of the shares this year.”
In Q4 2019, the number of bullish hedge fund positions on BHF stock increased by about 48% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with BHF’s growth potential.
Disclosure: None. This article is originally published at Insider Monkey.