In this article, we discuss David Einhorn’s top 5 stock picks. For Einhorn’s investment philosophy and his comments on certain stocks, please see David Einhorn’s Top 10 Stock Picks.
5. Change Healthcare Inc. (NASDAQ: CHNG)
Value: $90,322,000
Percent of David Einhorn’s 13F Portfolio: 5.43%
No. of Hedge Fund Holders: 45
Change Healthcare Inc. ranks 5th on the list of David Einhorn’s top 10 stock picks. Greenlight Capital slashed its stake in the Tennessee-based company by about 9% in the fourth quarter, ending the period with about 4.8 million shares of the company, worth $90 million. Change Healthcare offers IT solutions for the healthcare industry. Its products include revenue management systems, payments cycle system for billing automation, healthcare management portals and enterprise medical imaging solutions. In February, the company posted its quarterly results. Adjusted EPS in the most recent quarter totaled to $0.34, above the estimates by $0.03.
According to our database, the number of CHNG’s long hedge funds positions decreased at the end of the fourth quarter of 2020. There were 45 hedge funds that hold a position in Change Healthcare compared to 49 funds in the third quarter. The biggest stakeholder of the company is Camber Capital Management, with 13 million shares, worth $242.5 million.
In their Q1 2020 investor letter, Greenlight Capital highlighted a few stocks and Change Healthcare Inc. (NASDAQ:CHNG) is one of them.
Here is what Greenlight Capital said:
“We initiated a large long position in Change Healthcare (CHNG). CHNG is a healthcare technology company that owns the largest medical claims clearinghouse network and several leading software platforms. For years, we were short athenahealth, which promoted itself as the “backbone of the healthcare internet.” That label is more aptly applied to CHNG.
While similar healthcare assets trade for over 20x free cash flow, we were able to acquire our stake in CHNG for $11.40, or 9x our estimated free cash flow. Until recently, McKesson’s large retained ownership of the company rendered the stock less liquid, with an available float of under $1 billion and less than one quarter of all outstanding shares. We believe this limited investor interest in the new company. In February, McKesson announced an exchange offer that increased CHNG’s public float by more than 3x, making the company investable to a much broader range of potential shareholders.
The company has not shown meaningful top-line growth recently. We believe growth in the company’s core businesses has been obfuscated by several one-time factors including planned contract eliminations, the rollout of a new imaging platform, and the shift to ASC 606 accounting standards. With these events now behind the company, we expect solid growth in the coming years with the resumption of elective surgeries. CHNG shares ended the quarter at $9.99.”
