Market Commentary: 2 Deals This Billionaire Is Scooping Up

David Einhorn, the esteemed founder of Greenlight Capital, is widely recognized for making a killing during the Great Recession when he shorted the market. Nowadays, the investment world is curious about where Einhorn finds potential in the current market, particularly which stocks in his portfolio are poised for significant growth.

We ran his portfolio through a valuation filter to see what stocks were the cream of the crop with the most upside.

Key Points

• Danimer Scientific is marked as undervalued with over 55% upside potential, but is burdened by significant debt.
• Seadrill is perceived as a promising investment with analyst predictions indicating a substantial upside potential.
• With strong revenue growth, a healthier balance sheet, and a significant share repurchase program, Seadrill showcases management’s confidence in the future.

Promising Bet

Seadrill Limited presents an optimistic investment case in Einhorn’s portfolio. On average among six analysts, Seadrill is forecast to rise to $62 per share, inferring almost 40% upside. A DCF forecast validates the analysts forecast with a similar price target to within a few percentage points.

Seadrill’s management has acknowledged this value gap and has initiated a $250 million share repurchase program. The company’s recent performance bolsters this confidence; it reported a significant year-over-year revenue increase of 58% last quarter. And operating income soared by 10x in the same quarter versus the year prior quarter.

Seadrill’s positive trajectory is underlined by its healthy balance sheet. It’s cash rich compared to its long-term debt levels, is in the black over the past year, and features a handsome management buyback plan. This combination of factors makes Seadrill an attractive prospect in Einhorn’s portfolio and deserves close attention as the calendar turns to 2024..

Risky Proposition with Upside Potential

The position in Einhorn’s portfolio with most upside is Danimer Scientific. According to analysts consensus, Danimer’s stock has a potential upside of 55%, which would result in a rise to over $2.65 per share.

However, investing in Danimer is not without its risks. The company’s balance sheet reveals a concerning debt load of $268 million, overshadowing its cash reserves of just $62 million—a notable decrease from the $286 million reported in 2021.

Danimer’s recent financial performance raises further questions. The company experienced a 9% decline in revenue last year, coupled with a negative gross margin of almost 15%. Losses extended into the nine figures as a result. With that said, Danimer represents only a minor stake in Einhorn’s portfolio of less than 1%, which may be interpreted as as signal that even billionaire Einhorn doesn’t have a whole lot of confidence in the bet working out. This one might best be viewed as a call option that could pay off spectacularly, or could fold.