Summary
- The tech sector has not performed well so far this year.
Despite being known for his short positions in Tesla Inc. (TSLA, Financial) and Netflix Inc. (NFLX, Financial), Greenlight Capital leader David Einhorn (Trades, Portfolio) sees plenty of value opportunities in the market.
The activist investor’s New York-based firm, which seeks to generate long-term capital appreciation by taking an approach rooted in emphasizing intrinsic value, invests in companies that have the potential to achieve consistent returns and safeguard capital regardless of market conditions.
As of the end of the fourth quarter of 2021, the technology sector had the sixth-largest representation in Einhorn’s $1.75 billion 13F equity portfolio with a weight of 5.04%.
Einhorn’s portfolio composition by sector.
The sector has not had a good year so far as it is down more than 14%.
Total year-to-date returns by sector.
As such, value opportunities may be found among tech stocks in Einhorn’s 13F portfolio.
According to GuruFocus portfolio data, the guru’s largest tech holdings as of the end of the three months ended Dec. 31 were GoPro Inc. (GPRO, Financial), Kyndryl Holdings Inc. (KD, Financial), Intel Corp. (INTC, Financial), Sonos Inc. (SONO, Financial) and Concentrix Corp. (CNXC, Financial).
GoPro
In the fourth quarter, the investor trimmed his GoPro (GPRO, Financial) stake by 20% to 2.93 million shares. The position accounts for 1.73% of the equity portfolio. GuruFocus estimates Einhorn has lost 21.89% on the investment since establishing it in the first quarter of 2021.
Einhorn’s holding history of GoPro.
The San Mateo, California-based company, which manufactures action cameras and related software, has a $1.26 billion market cap; its shares were trading around $8.04 on Monday with a price-earnings ratio of 3.54, a price-book ratio of 2.05 and a price-sales ratio of 1.12.
The GF Value Line suggests the stock is significantly overvalued currently based on historical ratios, past financial performance and future earnings projections.
The GF Value Line suggests the stock is significantly overvalued.
GuruFocus rated GoPro’s financial strength 7 out of 10 despite having insufficient interest coverage and an Altman Z-Score of 2.39 that indicates it is under some pressure due to revenue per share declining in recent years. The return on invested capital, however, overshadows the weighted average cost of capital, meaning value is being created as the company grows.
The company’s profitability scored a 5 out of 10 rating on the back of margins and returns on equity, assets and capital that top a majority of competitors. GoPro also has a moderate Piotroski F-Score of 6 out of 9, indicating operations are typical for a stable company, and a predictability rank of one out of five stars. According to GuruFocus, companies with this rank return an average of 1.1% annually over a 10-year period.
Of the gurus invested in GoPro, Einhorn has the largest stake with 1.88% of the outstanding shares. Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Chuck Royce (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio) and Lee Ainslie (Trades, Portfolio) also own the stock.
Kyndryl Holdings
Einhorn established a 922,400-share position in Kyndryl (KD, Financial) during the quarter, allocating 0.96% of the equity portfolio to it. GuruFocus says he has lost an estimated 39.02% on the investment so far.
The IT infrastructure services company headquartered in New York, which was spun off of IBM (IBM, Financial) in November, has a market cap of $2.93 billion; its shares were trading around $13.01 on Monday with a price-book ratio of 1.08 and a price-sales ratio of 0.21.
Since the spinoff, the stock has tumbled over 50%.
Price chart for Kyndryl.
Kyndryl’s financial strength was rated 4 out of 10 by GuruFocus. In addition to weak debt-related ratios, the Altman Z-Score of 1.12 warns the company could be at risk of bankruptcy.
The company’s profitability did not fare as well, scoring a 2 out of 10 rating due to negative margins and returns that underperform a majority of industry peers. The low Piotrosk F-Score of 3 indicates operations are in poor shape. Revenue per share has also declined recently.
With 0.41% of outstanding shares, Einhorn is Kyndryl’s largest guru shareholder. Mario Gabelli (Trades, Portfolio), George Soros (Trades, Portfolio), Simons’ firm and Keeley-Teton Advisors, LLC (Trades, Portfolio) also have positions in the stock.
Intel
The guru entered a holding in Intel (INTC, Financial) during the quarter, buying 309,500 shares. The investment was given 0.91% space in the equity portfolio. GuruFocus data shows Einhorn has lost an estimated 6.29% on the stock so far.
The Santa Clara, California-based semiconductor chip manufacturer has a $194.76 billion market cap; its shares were trading around $47.87 on Monday with a price-earnings ratio of 9.83, a price-book ratio of 2.04 and a price-sales ratio of 2.49.
According to the GF Value Line, the stock is modestly undervalued currently.
The GF Value Line suggests the stock is modestly undervalued.
GuruFocus rated Intel’s financial strength 7 out of 10 as it is being supported by a comfortable level of interest coverage as well as a high Altman Z-Score of 3.28, indicating that it is in good standing. The ROIC also eclipses the WACC, so value is being created.
The company’s profitability fared better, scoring an 9 out of 10 rating as a result of operating margin expansion, strong returns that outperform a majority of competitors and a moderate Piotroski F-Score of 6. As a result of recording a slowdown in revenue per share growth, Intel’s two-star predictability rank is on watch. GuruFocus says companies with this rank return an average of 6% annually.
PRIMECAP Management (Trades, Portfolio) is the company’s largest guru shareholder with 0.97% of its outstanding shares. Other top guru shareholders include Seth Klarman (Trades, Portfolio), Chris Davis (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Al Gore (Trades, Portfolio), the Parnssus Endeavor Fund, Simons’ firm and Michael Price (Trades, Portfolio).
Sonos
Einhorn boosted his Sonos (SONO, Financial) holding by 20.62% in the most recent quarter to 438,680 shares. Now representing 0.75% of the equity portfolio, GuruFocus says he has gained an estimated 11.67% on the investment so far.
Einhorn’s holding history of Sonos.
Headquartered in Santa Barbara, California, the company, which develops and manufactures audio products like wireless speakers and home sound systems, has a market cap of $3.29 billion; its shares were trading around $25.80 on Monday with a price-earnings ratio of 25.05, a price-book ratio of 4.85 and a price-sales ratio of 2.12.
Based on the GF Value Line, the stock appears to be significantly overvalued currently.
The GF Value Line suggests the stock is significantly overvalued.
Sonos’ financial strength was rated 9 out of 10 by GuruFocus, driven by a comfortable level of interest coverage. The Altman Z-Score of 5.04 shows the company is in good standing even though assets are building up at a faster rate than revenue is growing. The ROIC also exceeds the WACC, so value creation is occurring.
The company’s profitability scored a 4 out of 10 rating. In addition to margins and returns that outperform a majority of industry peers, Sonos is supported by a high Piotroski F-Score of 7. Revenue per share has declined in recent years, however.
Holding 0.34% of Sonos’ outstanding shares, Einhorn is the largest guru shareholder. John Hussman (Trades, Portfolio) and Catherine Wood (Trades, Portfolio) also own the stock.
Concentrix
In the fourth quarter, the investor slashed his Concentrix (CNXC, Financial) position by 79.54% to 54,436 shares. It accounts for 0.56% of the equity portfolio. GuruFocus estimates Einhorn has gained 65.57% on the investment since establishing it in the fourth quarter of 2020.
Einhorn’s holding history of Concentrix.
The Fremont, California-based business services company specializing in customer engagement and business performance has a $10.48 billion market cap; its shares were trading around $200.24 on Monday with a price-earnings ratio of 26.04, a price-book ratio of 3.95 and a price-sales ratio of 1.85.
Since being spun off from TD Synnex Corp. (SNX, Financial) in December of 2020, the stock has climbed nearly 150%.
Price chart for Concentrix.
GuruFocus rated Concentrix’s financial strength 7 out of 10. Along with sufficient interest coverage, the high Altman Z-Score of 4.36 indicates the company is in good standing. The ROIC also surpasses the WACC, so good value is being created.
The company’s profitability did not fare as well, scoring a 5 out of 10 rating. Regardless, it is supported by strong margins, returns that top a majority of competitors and a high Piotroski F-Score of 8.
Sarah Ketterer (Trades, Portfolio) has the largest holding in Concentrix with 0.95% of its outstanding shares. Tweedy Browne (Trades, Portfolio), Steven Scruggs (Trades, Portfolio), Simons’ firm, Royce, Greenblatt and Hussman also have positions in the stock.
Additional holdings in the tech space
Other stocks Einhorn owns in the tech sector as of the end of the fourth quarter include EchoStar Corp. (SATS, Financial) and Katapult Holdings Inc. (KPLTW, Financial).
Disclosures
I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
The views of this author are solely their own opinion and are not endorsed or guaranteed by GuruFocus.com.
Source: https://www.forbes.com/sites/gurufocus/2022/03/25/5-tech-stocks-david-einhorn-favors/