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Famed value investor David Einhorn says he’s betting on CNH Industrial.
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The stock is trading cheaply but has upside as the agricultural boom picks up, he said.
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Einhorn’s Greenlight Capital is also raising bets on inflation after Donald Trump’s election.
Famed hedge fund investor David Einhorn is not one to shy away from market rejections, even if the stock in question is down more than 17% so far this year through Wednesday.
The founder of Greenlight Capital revealed that he has built a position in CNH Industrial, a global company that sells agricultural equipment.
“It’s exactly the kind of situation that no one cares about right now because it’s cheap, and the news in the next period probably won’t be very good,” the billionaire manager said during CNBC’s Delivering Alpha conference on Wednesday.
The value stock is part of Einhorn’s strategy to snap up overlooked companies in today’s expensive market.
“There are things that are really despised and hated and cheap in absolute terms and I think it makes sense to own them,” he said.
CNH stock appears to be cheap, as the company’s stock has been weighed down by an agricultural down cycle.
But this period won’t last, Einhorn said, anticipating that stocks will recover in the medium term.
“This year, the farm equipment universe is probably 20% below its average at the end of all recycling. And in three or four years, it will probably be 20% above,” he said. “Just the nature of how these companies operate.”
Although this timeline may disappoint investors looking for a quick profit, Einhorn pointed out some reasons to buy shares now. CNH has little leverage and is actively buying back shares. Since it is an attractive dividend payer, investors can earn a yield of up to 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 mentioned that his company has increased bets linked to inflation after Donald Trump’s electoral victory last week.
Although Einhorn does not expect price growth to rebound to pandemic-era highs, he cited that the incoming administration appears intent on pursuing expansionary policies that could push inflation into the 3.5%-4.5% range. next year.
Otherwise, Einhorn’s main concern has been the rising price of the stock market. In the hedge fund’s quarterly letter published last month, it warned that the stock was most overvalued since the company was founded in 1996.