We recently compiled a list of the 10 Best Stocks to Buy According to Billionaire David Einhorn. In this article, we are going to take a look at where Green Brick Partners, Inc. (NYSE:GRBK) stands against the other best stocks to buy according to Billionaire David Einhorn.
The markets are broken and getting worse. That’s the stance held by billionaire investor David Einhorn, who insists we are in a secular destruction of the professional asset management community. The sentiments come against one of the longest bull runs that have resulted in valuations in the equity markets getting out of hand.
While the S&P 500 is at record highs after a 30% plus gain year to date, Einhorn views the markets as fundamentally broken. Passive investors with no opinion or concern about value have been the main drivers pushing the market higher while shunning underlying fundamentals. According to Einhorn, passive investors increasingly buy into market indexes by default, propping growth stocks at the expense of value stocks.
READ ALSO: Billionaire Daniel Sundheim’s Top 15 Stock Picks Heading Into 2025 and Billionaire David Tepper’s Top 10 Stock Picks Heading into 2025.
Likewise, the billionaire hedge fund manager laments that value investors are increasingly marginalized.
“And so effectively instead of the valuation becoming the signal, the valuation people were just noise and everybody else is sort of the signal. And this is why I think we have a structurally dysfunctional market, a bit of a broken market, and essentially a perpetual erosion of value as a strategy, as you would,” Einhorn said in an interview with CNBC.
The sentiments underline the growing concerns that value stocks are becoming increasingly cheaper and cheaper relative to their underlying fundamentals. That’s in part because investors are turning their attention to indexes and growth stocks, resulting in overstretched valuations. Increased focus on growth stocks at the expense of value stocks has resulted in one of the most expensive stock markets in decades.
Amid the premium valuations, David Einhorn insists there is still some value to unlock by focusing on value stocks trading at discounted valuations. By focusing on value investments, Einhorn has generated strong long-term returns through Greenlight Capital, the hedge fund he founded in 1996 with $900,000 from family and friends.
Likewise, Greenlight Capital rose to prominence at the height of the financial crisis, as Einhorn sensed a window of opportunity to generate some returns by shorting the stock of Lehman brothers. Similarly, it was on the news in 2002 as it shorted Allied Capital, a transaction that was validated in 2002 by the US Securities and Exchange Commission.
Since 1996, Greenlight Capital has averaged 13.1% in annual returns compared to 9.5% gains for the S&P 500. The outperformance comes from Einhorn emphasizing the balancing of long- and short-term exposure in investments. Likewise, he advocates monitoring industry risks and obtaining insurance against foreseeable macro threats.
Additionally, stock picking has always been essential as one of Einhorn’s key investment strategies of integrating considerable picture awareness into successful portfolio management strategies. Diversification as one of the ways of spreading risks is also Einhorn’s key investment strategies.
“Having my eyes open to the big picture doesn’t mean abandoning stock picking, but it does mean managing the long-short exposure ratio more actively, worrying about what may be brewing in certain industries, and, when appropriate, buying some just-in-case insurance for foreseeable macro risks even if they are hard to time,” Einhorn said.
Our Methodology
To make the list of the best stocks to buy according to billionaire David Einhorn, we scanned Greenlight Capital’s investment portfolio. We then settled on the hedge fund’s largest holdings analyzing why they stand out and the number of hedge funds that hold stakes in them. Finally, we ranked the stocks in ascending order based on Greenlight Capital’s stake value.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Green Brick Partners, Inc. (NYSE:GRBK)
Greenlight Capital’s Stake Value: $790.72 Million
Number of Hedge Fund Holders: 23
Green Brick Partners, Inc. (NYSE:GRBK) is a diversified homebuilding and land development company. It acquires land to develop residential lots transferred to controlled builders or sold to third-party homebuilders. It also provides a financial services platform, including mortgage and title services. As interest rates come down and consumer purchasing power improves, it is one of the best stocks to buy, according to billionaire David Einhorn.
The stock is already up by more than 21% for the year, outperforming amid a challenging market environment hurt by high interest rates. Green Brick Partners, Inc. (NYSE:GRBK) delivered record-breaking Q3 2024 results on October 30, 2024. It logged a 25.7% increase in revenues at $523 million after delivering 956 homes at an average price of $546,900. Likewise, earnings per share were up 27% to $1.98.
Green Brick Partners continues to deliver industry-leading building gross margins of 32.7%. Higher margins come as the company sees a significant increase in net new orders that were up 11.3% to 877 units. Likewise, the company is on course to achieve record revenue in fiscal 2024.
Green Brick Partners, Inc. (NYSE:GRBK) plans to invest $700 million in land acquisition and development and plans to introduce Green Brick Mortgage in Q1 2025. In keeping with its infill strategy, the business also intends to grow into northern Austin, Texas. The company’s strategic growth plans affirm long-term prospects.
Overall, GRBK ranks 1st on our list of best stocks to buy according to Billionaire David Einhorn. While we acknowledge the potential of GRBK to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GRBK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.