Greenlight Capital, an investment management firm, published its first-quarter 2022 investor letter – a copy of which can be downloaded here. The Greenlight Capital funds (the “Partnerships”) returned 4.4%1 in the first quarter of 2022, compared to a 4.6% decline for the S&P 500 index. Try to spend some time taking a look at the fund’s top 5 holdings to be informed about their best picks for 2022.
In its Q1 2022 investor letter, Greenlight Capital mentioned Brighthouse Financial, Inc. (NASDAQ:BHF) and explained its insights for the company. Founded in 2016, Brighthouse Financial, Inc. (NASDAQ:BHF) is a Charlotte, North Carolina-based life insurance company with a $4.3 billion market capitalization. Brighthouse Financial, Inc. (NASDAQ:BHF) delivered a 9.29% return since the beginning of the year, while its 12-month returns are up by 26.84%. The stock closed at $56.61 per share on April 20, 2022.
Here is what Greenlight Capital has to say about Brighthouse Financial, Inc. (NASDAQ:BHF) in its Q1 2022 investor letter:
“Speaking of rising interest rates, it is difficult to find a company that we think benefits more from rising rates than Brighthouse Financial (BHF). For the better part of half a decade, we have experienced the “bear case” that BHF is beholden to capital markets and particularly sensitive to low interest rates. Our view is that the shares have been inexpensive despite a low interest rate environment. With the environment changing, it turns out that the capital market sensitivity goes both ways. Goldman Sachs estimates that the interest rate increase just through the end of March will add $2 billion to BHF’s distributable earnings over the next 5 years. That would seem significant compared to BHF’s entire equity market capitalization of $4 billion. Two billion dollars would equate to about $26 per share. The stock ended the quarter at $51.66.
Gains from a higher interest rate environment need not be temporary. The company is now presented with an opportunity to reduce interest rate risk either by hedging or by transferring risk of its legacy business to a third party reinsurer. BHF has not attracted a new top 30 institutional shareholder in more than a year and its share price fell by less than one percent during the quarter. Management is taking advantage of the rising discount to book value by repurchasing shares. The improved environment should enable even faster share repurchases, which we would encourage the company to pursue.”
Our calculations show that Brighthouse Financial, Inc. (NASDAQ:BHF) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Brighthouse Financial, Inc. (NASDAQ:BHF) was in 30 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 29 funds in the previous quarter. Brighthouse Financial, Inc. (NASDAQ:BHF) delivered a 2.46% return in the past 3 months.
In February 2022, we also shared another hedge fund’s views on Brighthouse Financial, Inc. (NASDAQ:BHF) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.
Disclosure: None. This article is originally published at Insider Monkey.