No. of Recommendations: 16
David Einhorn of Greenlight Capital is among the traditional headliners at the Sohn Investing Conference, which raises money to fight childhood cancer and has metastasized to iterations around the globe. The annual U.S. version is today in New York.
Mr. Einhorn likes to make fun of market sentiment, and for a number of years he used his time at the Sohn lectern to promote short ideas, which became his public identity after he proposed shorting Allied Capital in 2002. His long-running battle to defend this position is the subject of his 2008 book, Fooling Some of the People All of the Time, which is one of the more entertaining investing books around.
This year, in addition to a long idea, he made an interesting argument around value investing. He is not the first to observe that the Bogle-ization of stock market investing -- the massive shift from active, high-fee mutual funds to passive, low-fee index funds and ETFs -- has reduced the number of active managers and the idea generators who worked for them.
He's now arguing that the number of active, professional value investors has been reduced so dramatically that it is once again a fertile area for industrious value investors. It was either in his talk or subsequent interview on CNBC that he suggested "this must be what Warren Buffett felt like in the '50s."
His long idea this year was Solvay SA, a Belgian chemicals business that recently spun out its specialty chemicals business. He called it his AI play -- as in Solv-a-y. He makes a lot of puns like that. He said his best returns in recent years have come from spinout situations due to the various well-known phenomena that tend to follow spinouts -- general confusion, miscast shareholders, irrational selloffs, etc.
Solvay trades under the ticker SOLB in Brussels, where the exchange closed before Mr. Einhorn's remarks. It trades on the pink sheets in the U.S. under the ticker SLVYY, which predictably exploded with his talk at Sohn, which CNBC took live. He called it a solid chemicals business irrationally trading at a P/E in the low single digits and a yield of nearly 10% after the spinout of the specialty business to a new entity apparently named by a Scrabble player (Syensqo). He finished buying Greenlight's 5% position in December following completion of the spinout.
The U.S. listing was up 14% today on 203x its normally very light volume following his remarks.
This is a top-5 position at Greenlight, he said. So is gold, both the GLD ETF and actual gold bars, because he thinks the unsustainable U.S. fiscal policy will bring about a reckoning at some point.
He tends toward extremes on a number of topics and the performance of Greenlight's public listing, GLRE, has been really bad. It still trades below its 2007 IPO price of $19. Mr. Einhorn says the loss of competitors due to the rise of passive investing has improved his prospects and GLRE has doubled from its lows in 2020. He and Mr. Buffett, obviously, disagree on the subject of gold.
So no endorsement, but I thought his views might be of interest to value investors here.
