Market Environments Like Today's Have Historically Been Great For David Einhorn's Greenlight Capital – A Look At Its Top Three Holdings

David Einhorn’s career on Wall Street has been an interesting one, and despite being one of the most-followed and well-known hedge fund managers in the United States, his Greenlight Capital is currently not managing a significant amount of money (relatively). Assets under management at Greenlight stood at a somewhat modest $1.44 billion as of the end of 2022. The beginning of Einhorn’s career could only be described as a meteoric rise, driven by heady returns in the early days of Greenlight. 

Einhorn started Greenlight Capital in 1996 with just $900,000 from friends and family and in time assets under management ballooned to over $12 billion as the fund generated annualized returns of 26% for more than a decade. The longest bull market on record, however, took a toll on Einhorn and his investing strategy – he is known as both a very astute short-seller and a deep-value investor on the long side. 

The levitation of the market, along with a zero-rate environment, in the 10 years after the Great Financial Crisis of 2007-08 was about as difficult of an environment as could be imagined for the Cornell-educated hedge-fund manager. Alternatively, the current market environment, whereby long/short stock-picking is making a comeback, is ideal for Einhorn and Greenlight has done well as of late. 

This article will provide a cursory examination of Greenlight’s three largest long stock holdings from its most recent 13-F, which was filed on the last day of 2022. It is important to note that the portfolio may have changed significantly over the last couple of months, but more than likely, these are long-term positions for Greenlight given its value stance. 

1. Green Brick Partners 

Einhorn’s largest stock position was in Green Brick Partners GRBK. The company is a public homebuilder and land developer based in Texas with eight homebuilder brands across four states. Based on this business model, one would immediately suspect that Green Brick may not be performing so well due to rising interest rates and concerns about the housing market as a whole.

In this case that assumption would be wrong, however, as the stock is actually sitting near new all-time highs. Over the last 52 weeks, shares have climbed just over 80%, including a nearly 50% gain in 2023 alone. On a quarterly basis, revenue and net income have been choppy lately, but on an annual basis, both revenue and net income have been in a very significant uptrend since 2018. 

Einhorn’s basic thesis with regard to this name appears to be that it is a company that is showing consistent revenue and income growth, while also being quite cheap – shares trade at a P/E ratio under 6 and a price/book ratio of 1.60. 

The depressed earnings valuation is likely due to the market’s concerns about the issues highlighted earlier – rising rates and the squeeze that is likely coming in the mortgage market. 

2. Brighthouse Financial 

Greenlight’s second-largest holding – valued at roughly $164 million – is insurance company Brighthouse Financial BHF. Brighthouse describes itself as one of the largest providers of annuities and life insurance in the United States, with $219 billion in total assets and 2.6 million insurance policies and annuities in force. 

Seeing an insurance company near the top of Einhorn’s 13-F does not come as a surprise as the investor has emulated Warren Buffett in many ways throughout his career, and the Oracle of Omaha has made untold billions in insurance. 

Once again, however, this is a bit of a contrarian play as rising rates continue to take a toll on insurance company portfolios. Brighthouse is down over 20% over the last year and roughly 14% in 2023. The company has seen choppy revenues and plenty of quarterly losses as of late. 

Nevertheless, sales were up almost 20% in 2022 and the company eked out a $5 million profit for the year. In order for this position to work out for Einhorn, who is sitting on a loss currently, Brighthouse is going to need to not only maintain sales growth but do a better job of turning revenue into earnings and free cash flow.

3. Consol Energy

Consol Energy CEIX is Greenlight’s third-largest position in dollar terms, at $118 million. Like Green Brick, Greenlight has made a ton of money in this name and it is driving performance. The fund is sitting on an average buy price of $9.47 vs. today’s open of $60.00. Once again, this position was likely highly contrarian when it was put on, and it has paid off in a major way.

Consol is a Pennsylvania coal miner – far removed from the tech darlings of Silicon Valley. The company saw a huge jump in both revenue and net income in 2022 and this has undoubtedly driven the stock price. Nevertheless, Consol remains incredibly cheap with a P/E below 5 and a P/B of 1.6. It would appear that Wall Street is far from sold on the resurgence of coal and there is significant doubt that Consol is going to be able to maintain its most recent earnings.

Featured photo by Aditya Vyas on Unsplash.com