David Einhorn Having a Banner Year in 2022: 10 Favorite Stock Picks

In this article, we discuss the 2022 portfolio of David Einhorn and his 10 favorite stock picks. If you want to skip our detailed analysis of Einhorn’s stock picks and hedge fund performance, go directly to David Einhorn Having a Banner Year in 2022: 5 Favorite Stock Picks.

David Einhorn, founder and president of Greenlight Capital, has been making the news as of late. His New York-based hedge fund gained 4.4% in the first quarter of 2022. During the same period, the S&P 500 posted losses of 4.6%. As of May 6, Greenlight Capital is up 15.4% in the year, according to Financial Post.

This growth was driven primarily by the fund’s holdings in materials and mining stocks such as Teck Resources and CONSOL, which boomed as the Russian invasion of Ukraine increased prices of coal.

In a Q1 2022 letter to investors, Einhorn agreed with the market bears, conceding that there was a “decent risk” that the 13-year bull market was coming to an end, and United States exiting the era of relative, unscathed peace it has enjoyed since the end of World War 2. He noted that inflation, helped along by the effects of the Russia-Ukraine war, was slowing the economy and destroying demand in the market. The investor also made remarks critical of the Fed, stating that they weren’t introducing enough “tightening” measures to curb inflation.

Einhorn’s Big Bet On The Housing Sector

Green Brick Partners, Inc. (NASDAQ:GRBK) is the largest holding of Greenlight Capital, and was also the largest detractor for the fund in the first quarter. It slumped 20% in the first two months of the year, as the market develops a new consensus that the housing market is nearing a collapse. According to Einhorn, analysts base their view on the narrative of rising mortgage and housing prices, signaling a decline in the industry. But the Greenlight Capital president does not share the market view. He notes that comparisons between today’s scenario and market conditions before the 2008 crash are “strained”.

In 2006, overbuilding was widespread in the United States, with 3.5 million existing homes for sale on average and the 30-year mortgage rate standing at an average of 6.4%. Today, Einhorn notes an underinvestment in the housing sector, which has led to a shortfall of around 2 million units in the market. The mortgage rate is around 5%, with tight underwriting standards as compared to the loose risk-calculation that led to the 2008 housing crash. Einhorn thinks that the current slowdown in housing sales doesn’t reflect a traditional decline, instead this points only to the market’s inability to build more homes amid persisting labor and supply chain issues. Even if the industry was to experience a decline in demand, it wasn’t that big of a threat to earnings, Einhorn claims, stating that homebuilding stocks and home prices performed well during the inflationary period of the mid-to-late 1970s.

 

In the first quarter of 2022, Einhorn’s Greenlight Capital boasted assets under management (AUM) of $1.57 billion. It made 7 new stock purchases, increased stakes in 12 stocks, sold out of 12 and reduced holdings in 16 equities. The top 10 holdings represented 69.72% of the total portfolio. Investors are piling their money into sure names such as Alphabet Inc. (NASDAQ:GOOG), Meta Platforms, Inc. (NASDAQ:FB), and Amazon.com, Inc. (NASDAQ:AMZN), and in this article we’ll focus on the stocks Greenlight Capital’s David Einhorn is bullish on.

Our Methodology

Greenlight Capital’s portfolio for the first quarter was used to identify its top 10 holdings. Amateur investors can improve their selection of stocks by learning and copying the investments made by professional money-managers on Wall Street. That is why we have provided hedge fund sentiment around each stock, which has been derived from Insider Monkey’s database of 900+ elite hedge funds.

10 Favorite Stock Picks of David Einhorn

10. Warner Bros. Discovery, Inc. (NASDAQ:WBD)

Greenlight Capital’s Stake Value: $41.16 million

Percentage of Greenlight Capital’s 13F Portfolio: 2.61%

Number of Hedge Fund Holders: N/A

In April 2022, AT&T Inc. (NYSE:T) spun off its Warner Bros segment and merged it with Discovery (DISCA), leading to the creation of Warner Bros. Discovery, Inc. (NASDAQ:WBD). This newly merged platform boasts a collective 100 million in subscribers, and various brands in its portfolio such as CNN, HBO, Discovery and many popular motion pictures produced under the Warner Bros name.

Greenlight Capital increased its stake in Warner Bros. Discovery, Inc. (NASDAQ:WBD) by 154% in the first quarter of 2022, owning 1.65 million shares valued at $41.16 million. Its largest Q1 shareholder was Laurion Capital Management with a $338 million stake. In total, 76 hedge funds reported ownership of positions in Warner Bros. Discovery, Inc. (NASDAQ:WBD) at the end of the fourth quarter of 2021.

Cowen analyst Doug Creutz on May 12 upgraded Warner Bros. Discovery, Inc. (NASDAQ:WBD) to ‘Outperform’ from ‘Market Perform’ with a revised price target of $24 from $31. The analyst is cautious on the highly competitive streaming space, and sees the firm’s decision not to overspend in these consumer wars as a more sustainable approach in comparison to its competitors. Creutz also states that the potential to improve the performance of the Warner Bros segment under the management of Discovery is ‘compelling’.

Silver Ring Value Partners, an investment firm, highlighted many stocks in its Q1 2022 investor letter, and Warner Bros. Discovery, Inc. (NASDAQ:WBD) was one of them. The fund said:

“Discovery completed the acquisition of the Warner Media business from AT&T in April, and the combined business is now named Warner Brothers Discovery. We are currently in the middle of an interesting technical event, following the spin-off special situation playbook.

The acquisition was structured as a spin-off of Warner Media, with AT&T shareholders receiving ~ 70% of the shares in the combined entity, or ~ 1.7B shares. Many of these shareholders owned AT&T for its phone business and its dividend. It appears that there has been elevated noneconomic selling as these shareholders exit regardless of price. On the other side, few if any investors want to buy the WBD shares prior to this forced selling being over.

This has caused the stock to decline substantially despite being already priced at a low valuation and reporting good recent results. The people selling aren’t likely considering either of those factors, which is what creates the opportunity. One wrinkle as compared to the usual spin-off special situation setup is that the non-economic selling is likely to last for some time given the retail nature of the shareholder base. This is different from the typical pattern where there is a quick sharp sell-off as institutional investors dump their shares quickly following the spin.

In anticipation of this situation, I had sold our equity prior to the major declines, and replaced it with January 2024 call options. I have since been using a portion of the cash generated from the equity sale to add to the option position as the stock price declines. While this does give up some time horizon, which I am usually loathe to do, both the technical selling and the question of the success of the merger integration are likely to be resolved well before then.

If I am correct and this is a much more valuable business than the market is giving it credit for, we will make a hefty profit. If I am wrong, and the combination of financial leverage, merger integration problems and secular risks are more serious than I foresee, we will have a moderate loss. I like our odds and the asymmetry of risk vs. reward.”

In addition to Alphabet Inc. (NASDAQ:GOOG), Meta Platforms, Inc. (NASDAQ:FB), and Amazon.com, Inc. (NASDAQ:AMZN), Warner Bros. Discovery, Inc. (NASDAQ:WBD) ranks as one of the stocks famous investors are buying in 2022.

9. CONSOL Energy Inc. (NYSE:CEIX)

Greenlight Capital’s Stake Value: $55.49 million

Percentage of Greenlight Capital’s 13F Portfolio: 3.52%

Number of Hedge Fund Holders: 22

CONSOL Energy Inc. (NYSE:CEIX) is a Pennsylvania-based company which deals in the production and worldwide export of bituminous coal. The growing demand of coal has put CONSOL in the spotlight of investors, and its shares have surged 121.84% in the year to date, and 301.69% in the last 12 months as of May 24.

On May 5, B. Riley analyst Lucas Pipes maintained a ‘Buy’ rating on CONSOL Energy Inc. (NYSE:CEIX) shares and bumped the price target to $63 from $46. He sees an expanding order book for the firm in 2023.

In Q1 2022, CONSOL Energy Inc. (NYSE:CEIX) posted earnings per share of $1.55, missing estimates by $0.30. The company raked in revenue of $358.5 million for the quarter, also falling below estimates by $16.6 million.

Out of all the hedge funds tracked by Insider Monkey, 22 hedge funds reported bullish bets on CONSOL Energy Inc. (NYSE:CEIX) at the end of the first quarter of 2022. This showed a positive trend over the previous quarter where 15 hedge funds were long on the company shares.

David Einhorn’s Greenlight Capital was the largest shareholder of CONSOL Energy Inc. (NYSE:CEIX) at the close of the first quarter of 2022, with 1.47 million shares priced at $55.5 million, amounting to a 3.52% slice of its total portfolio.

Greenlight Capital also discussed CONSOL Energy Inc. (NYSE:CEIX) in its Q2 2021 investor letter. The fund said:

Thermal Coal and Natural Gas

ESG investing is inflationary, as green energy is simply more expensive than hydrocarbons. Hydrocarbon energy companies are starved for capital and are being told to change their ways. The result is less exploration and drilling. Even with benchmark oil prices surging over the last year, companies are loath to drill more. Normally, the cure for high prices is high prices. With ESG in the proverbial driver’s seat, we might need much higher prices still
in order to increase investment to meet demand.

There is almost nothing less popular than thermal coal. From 2011 to 2020, U.S. coal production declined by 51%. U.S. demand has fallen as we’ve shifted to alternative sources of electricity. As unpopular as coal is though, it still makes up about 20% of U.S. electricity generation. Globally, coal demand is growing modestly as China and India add power generation capacity faster than the West is reducing it. Even so, reduced oil and gas drilling has caused natural gas prices to advance and coal prices are following. Seaborne thermal coal prices are up 140% year-over-year and at the highest levels since 2011, and Northern Appalachia thermal coal prices are catching up, rising 23% in the last month alone.

We own CONSOL Energy (CEIX), the lowest cost, most efficient miner in Appalachia, which is poised to benefit from rising coal prices. It trades at 12x consensus earnings estimates that look stale to us, as they do not reflect recent coal price gains.”

8. The ODP Corporation (NYSE:ODP)

Greenlight Capital’s Stake Value: $64.39 million

Percentage of Greenlight Capital’s 13F Portfolio: 4.09%

Number of Hedge Fund Holders: 24

The ODP Corporation (NYSE:ODP) provides digital workplace technology solutions, and operates a network of retail stores under its Office Depot brand which offer business services and products such as office, printing, bathroom and break-room supplies. At the close of the first quarter, Einhorn held a $64.4 million stake in the company consisting of 1.4 million shares, which represented 4.09% of his overall portfolio.

Investors were seen selling off The ODP Corporation (NYSE:ODP) shares at the close of the first quarter of 2022, where 24 hedge funds held stakes in the firm at a value of roughly $556 million. In contrast, 28 hedge funds held stakes worth $476 million in the company a quarter earlier.

Reporting its first quarter earnings on May 4, The ODP Corporation (NYSE:ODP) disclosed earnings per share of $1.27, outperforming estimates by $0.48. The company’s revenue of $2.18 billion for the quarter also exceeded estimates by $44.9 million. HG Vora Capital Management was the biggest Q1 shareholder of The ODP Corporation (NYSE:ODP), with 5 million shares valued at $229 million.

At the end of December, The ODP Corporation (NYSE:ODP) announced that it had sold its CompuCom Systems subsidiary to an affiliate of Variant Equity in deal valued at nearly $305 million. The company also announced the authorization of a $200 million increase to its existing $450 million stock repurchase plan, bringing the total amount to $650 million.

Greenlight Capital gave its views on The ODP Corporation (NYSE:ODP) in a Q4 2021 letter to investors. Here’s what the fund said:

ODP Corporation (ODP) is a holding company that operates retail brands including Office Depot and OfficeMax, and provides business services and products through a B2B distribution platform. ODP is undergoing a corporate transformation that we expect will conclude over the next year, resulting in the separation of its retail and business solutions divisions. ODP has a strong cash position and an undemanding valuation and is in the process of buying back 20% of its shares by the middle of 2022.

As the company is being broken up, we believe that a sum-of-the-parts analysis is appropriate. In June, Staples offered $1 billion in cash for ODP’s retail division, so we will use that. The remaining B2B business has better prospects and we believe that it deserves a higher multiple. We see $200 million of 2022 pro-forma EBITDA for this segment and by assigning a 7x multiple we arrive at $1.4 billion for this piece. Adding in $400 million of net cash and our estimate of $219 million of current value for its recently announced sale of CompuCom Systems (a technology support and services unit), brings us to just over $3 billion of total value. Using the last reported share count, this equates to about $55 per share.

Not included in our valuation is Varis. ODP has assembled a world-class team to create this nascent digital commerce SaaS and procurement business. We believe Varis is promising and offers ODP shareholders a potentially valuable option. We first acquired ODP shares in February and established a medium-sized position throughout the year at an average price per share of $43.69. ODP shares ended the year at $39.28.”

7. The Chemours Company (NYSE:CC)

Greenlight Capital’s Stake Value: $67.42 million

Percentage of Greenlight Capital’s 13F Portfolio: 4.28%

Number of Hedge Fund Holders: 27

The Chemours Company (NYSE:CC) offers performance chemicals to a range of industries such as transportation, semiconductors, plastics, coatings, and consumer electronics, among others. As of May 24, shares of the company have gained 32.38% in the last 6 months.

David Einhorn, according to his portfolio for the first quarter, owned 2.14 million shares of The Chemours Company (NYSE:CC) with a price tag of $67.4 million, showing an increase in holding of 23% from the previous quarter where the fund held 1.74 million shares of the company.

On February 11, RBC Capital analyst Arun Viswanathan lowered the firm’s price target on The Chemours Company (NYSE:CC) to $41 from $44, and reiterated an ‘Outperform’ rating on the company shares. The analyst believes that headwinds should moderate into the second half of 2022, and continue to improve in 2023.

The company’s revenue for the first quarter of 2022 was recorded at $1.76 billion, showing an increase of 22.84% from the year-ago quarter and beating estimates by $193.6 million. EPS stood at $1.46, outperforming estimates by $0.55.

27 hedge funds held positions in The Chemours Company (NYSE:CC) at the end of the first quarter, down from 35 a quarter ago. Its largest shareholder was John Petry’s Sessa Capital, which held a $221.3 million stake comprising of 7.02 million shares.

Here is what investment firm Miller Value Partners had to say about The Chemours Company (NYSE:CC) in its Q4 2021 investor letter:

“The Chemours Co (CC) rose 16.4% over the period after reporting Q3 revenue of $1.68Bn, +36% Y/Y and +4% ahead of consensus driven by 25% volume growth while pricing added +11%. Earnings Before Income, Taxes, Depreciation, and Amortization (EBITDA) of $372M rose +77% and beat estimates by 9% as higher top-line results more than offset incremental cost headwinds. Chemours raised FY21 guidance, including EBITDA of $1.3Bn-$1.34Bn (from $1.1Bn-$1.25Bn), Earnings Per Share (EPS) of $3.93-$4.13 (from $2.84-$3.56), and free cash flow (FCF) of at least $500M (from >$450M). Additionally, Chemours announced the closing of the previously announced sale of the Mining Solutions business for $520M.”

6. Global Payments Inc. (NYSE:GPN)

Greenlight Capital’s Stake Value: $69.24 million

Percentage of Greenlight Capital’s 13F Portfolio: 4.39%

Number of Hedge Fund Holders: 64

Global Payments Inc. (NYSE:GPN) provides financial payment technology around the globe. Greenlight Capital held 506,000 shares of the company, according to its Q1 portfolio, which represented 4.39% of its overall holdings. Out of all the hedge funds in the database of Insider Monkey, 64 owned stakes worth $3.23 billion in the company at the close of the first quarter, down from 67 hedge funds a quarter earlier.

On May 3, Citi analyst Ashwin Shirvaikar reiterated a ‘Buy’ rating on Global Payments Inc. (NYSE:GPN) shares and set the price target at $180. He noted that the stock slumped 9% after it negatively revised its FY22 revenue outlook by $35 million, and he views this as unjustified. The analyst sees the current share prices offering investors a “remarkably attractive” buying opportunity.

In the first quarter of 2022, Global Payments Inc. (NYSE:GPN) reported an EPS of $2.07, exceeding market estimates by $0.03. The quarterly revenue of $1.95 billion fell below estimates by $1.26 million.

Investment firm Oakmark Funds, in its Q1 2022 investor letter, discussed the prospects of Global Payments Inc. (NYSE:GPN). Here’s what the fund said:

Global Payments (NYSE:GPN) is a leading provider of merchant acquiring services. The company is also one of the largest providers of payment processing and related technology solutions to credit card issuers. We believe Global Payments’ merchant acquiring business is well positioned given its strength in software-driven payments. This is one of the fastest growing parts of the industry as small business customers are increasingly recognizing the efficiency benefits of having payments seamlessly integrated into the software they use to run their businesses. In addition, Global Payments benefits from the broader secular shift away from cash and toward electronic payment methods. Together, these tailwinds have the potential to drive low-double-digit revenue growth and even faster earnings growth. With this strong outlook and with management returning a significant portion of free cash flow to shareholders via repurchase, we think the stock looks attractive at its current valuation of just 12.5x next year’s expected EPS.

Along with Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN) and Meta Platforms, Inc. (NASDAQ:FB), Global Payments Inc. (NYSE:GPN) is commanding the attention of investors on Wall Street.

See the rest of the stocks in this list by clicking 5 Favorite Stock Picks of David Einhorn.