David Einhorn’s hedge fund, Greenlight Capital, made some big gains in 2022 and was one of the few to benefit from last year’s bear market. The terms suited the style of the value investor and the fund had its best year in a decade. However, so far this year has been a different story as Greenlight has underperformed across broad markets.
However, Einhorn isn’t about to bang his head against the wall and try to fit a square into a circle. In a recent letter to shareholders, he stated: “Many have commented that what worked in 2022 did not work in early 2023, and vice versa. That seems about right to us.”
While the economy is sending mixed signals — employment, wages and household balance sheets look “quite strong” despite concerns that tightening credit standards “will constrain the economy and cause a substantial slowdown” — Einhorn remains receptive to whichever way the wind blows. “Our net long exposure is now back in line with the long-term average,” he said. “We are just as open to becoming even more net long or returning to bearish as economic events unfold.”
In the meantime, Einhorn has doubled down on stocks he thinks will do well regardless of the economic background, including a few under-the-radar energy stocks. We ran these tickers through the TipRanks database to find out what Wall Street’s stock experts think about them. Let’s see the results.
Gulfport Energy Corporation (GPOR)
The energy sector was one of the few segments to shine in 2022, and while Einhorn is open to new ideas, it seems he is still supportive of his opportunities. He bought stock in Gulfport Energy Corporation, an independent oil and natural gas exploration and production (E&P) company based in Oklahoma City.
With operations primarily focused on the Appalachia and Anadarko basins, the company is engaged in the acquisition, development and production of oil and gas reserves. Gulfport has a portfolio that includes both conventional and unconventional assets, with a particular emphasis on shale formations such as Ohio’s Utica Shale and Oklahoma’s SCOOP Game.
The company takes a disciplined approach to capital allocation, prioritizing high-quality assets with favorable risk-return profiles. It’s a strategy that helped Gulfport deliver solid results in its most recently reported quarter — for 1Q23.
In the quarter, revenue increased 5% year over year to $1.05 billion. The company exceeded expectations with total production of 1,057.4 MMcfe (million cubic feet of gas equivalent) per day. Gulfport achieved net income of $523.1 million and adjusted EBITDA of $229.7 million, beating consensus estimates. In addition, the company generated $63.1 million in Adjusted Free Cash Flow.
The market reacted well to the results, and probably Einhorn too. In Q1, he increased his GPOR stake by 126% by purchasing 157,500 shares. He now owns a total of 283,000 shares, currently worth $28.26 million.
Truist 5-star analyst Neal Dingmann is also a fan and thinks the company has some distinguishing features.
“Gulfport has a number of variables that stand out from most other small cap, gaseous E&Ps resulting in sustained, remarkable FCF generation despite weak natural gas prices. The company’s minimum/maintenance capital will drive production growth in a program that should benefit from operational efficiencies and lower OFS costs, while capping nearly all production this year and 60%+ next year at +$3/mcf. The low level of existing debt enables GPOR to return most of the free cash flow to shareholders in the form of material share repurchases,” said Dingmann.
Turning these thoughts into ratings and numbers, Dingmann views GPOR as a buy, while his $122 price target suggests shares will rise 22% higher in the coming months. (Click here to view Dingmann’s track record)
Elsewhere on the street, this under-the-radar name gets an extra 1 Buy and Hold each, all of which add up to an Average Buy consensus rating. Assuming the $114.67 average target, the stock has room for ~15% growth over the next year. (To see GPOR Inventory Forecast)
CONSOL energy (CEIX)
The next Einhorn endorsed name we’ll get into is CONSOL Energy, a leading US coal producer and exporter. With its active mining operations dating back to 1864, the company owns a diversified portfolio of coal assets, which includes both underground and surface mining operations.
The company’s flagship facility is the Pennsylvania Mining Complex, which has the capacity to produce approximately 28.5 million tons of coal per year. The complex consists of three large-scale underground mines: Bailey Mine, Enlow Fork Mine and Harvey Mine. In addition, the company owns a full export terminal in Baltimore. Given the expected decline in coal consumption in the US, CONSOL Energy has shifted its focus abroad, making its export business increasingly important.
The company has also benefited from Russia’s war against Ukraine as Europe looks for alternative coal supplies rather than relying on Russia’s coal exports. The latest set of quarterly results shows how CONSOL has been positively impacted.
GAAP net profit in the first quarter reached $230.4 million compared to a loss of $4.4 million in the same period last year, while adjusted EBITDA increased to $346.3 million from $169.2 million a year ago . On sales, revenues were up 92.1% year-over-year to $688.6 million, beating Street’s forecast by nearly $96 million.
Along with the quarterly results, CONSOL also announced the dividend payment, set at $1.10 per common share. This represented 17% of the cash available for distribution. The $1.10 dividend works out to $4.40 per share on an annualized basis and gives a high yield of 7.52%.
As for Einhorn, he must have been pleased with the results. In the first quarter, he bought 904,190 shares, increasing his stake in the company by 50%. In total, he now owns 2,716,741 shares, representing a current market value of $158.41 million.
Einhorn is not the only bull on CONSOL. Nathan Martin, a 5-star analyst at Benchmark, is impressed with the company’s performance in recent months, writing, “CEIX is now almost fully contracted for 2023 and 60% committed and priced for 2024 based on our estimates, which provides improved cash flow visibility. In addition, it is close to meeting its debt reduction targets. As such, the company has increased its shareholder return program to 75% of free cash flow and increased its repurchase authorization to $1 billion as it is expected to trigger repurchases.”
These comments support Martin’s Buy rating, while his $80 price target implies that investors will pocket a ~39% return one year from now. (To view Martin’s track record, click here)
CEIX definitely fits the under-the-radar description. Martin is currently the only analyst to have published an overview of the company’s outlook over the past 3 months. (To see CEIX stock forecast)
To find great ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a recently launched tool that brings together all of TipRanks’ stock insights.
Disclaimer: The opinions expressed in this article are solely those of the recommended analysts. The content is for informational purposes only. It is very important to do your own analysis before making an investment.
