-
Famed value investor David Einhorn says he’s betting on CNH Industrial.
-
The stock is trading cheaply, but also has upside as the agricultural boom takes hold, he said.
-
Einhorn’s Greenlight Capital is also increasing inflation bets following the election of Donald Trump.
Famed hedge fund investor David Einhorn doesn’t shy away from market rejections, even though the stock in question has fallen more than 17% since Wednesday.
The founder of Greenlight Capital announced that he has built a position in CNH Industrial, a global agricultural equipment company.
“It’s exactly the kind of situation that absolutely no one cares about right now, because it’s cheap, and the news is probably not going to be very good for a while,” the billionaire manager said Wednesday during CNBC’s Delivering Alpha conference.
The value share is part of Einhorn’s strategy to snap up overlooked companies in today’s expensive market.
“There are things that are really despised, hated and cheap on an absolute basis that I think it makes sense to own,” he said.
CNH shares look cheap as company shares are under pressure from a downturn in agricultural cycle.
But this period will not last, Einhorn said, anticipating a recovery in stocks in the medium term.
“This year the agricultural equipment universe is probably 20% below average at the end of all the recycling. And sometime in three or four years it will probably be 20% above that,” he said. “Just the nature of how these businesses operate.”
While this timeline may disappoint investors looking for quick profits, Einhorn mentioned a few reasons to buy the stock now. CNH has little influence and actively buys back shares. Because it is an attractive dividend payer, investors can earn returns as high as 4%, he said.
CNH jumped after Einhorn’s comments, rising 6.27% to $10.68 per share as of 9:52 a.m. ET on Thursday.
During the conference, the Greenlight executive also cited that his company has increased its bets on inflation following Donald Trump’s election victory last week.
While Einhorn does not expect price growth to recover to pandemic-era highs, he cited that the new government appears committed to an expansionary policy that will push inflation to a range of 3.5%-4% next year. 5% could push.
Otherwise, Einhorn’s biggest concern was the rising price of the stock market. In the hedge fund’s quarterly letter published last month, he warned that shares were the most overvalued since the company was founded in 1996.
