David Einhorn Builds Up Green Brick Partners Stake

Summary

• The position was increased by 4.98%.
• The company recently reported a record quarter.

After reducing his stake in Green Brick Partners Inc. (GRBK, Financial) during the first quarter, David Einhorn (Trades, Portfolio) revealed earlier this week he boosted the position by 4.98%.

The activist investor’s New York-based firm, Greenlight Capital, which strives 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. Einhorn is also known for his short positions, among the most famous of which is Tesla
TSLA
Inc. (TSLA, Financial).

According to GuruFocus real-time picks, a Premium feature based on 13D, 13G and Form 4 filings, the guru invested in 827,082 shares of the company on June 30, impacting the equity portfolio by 2.47%. The stock traded for an average price of $56.31 per share on the day of the transaction.

He now holds 17.43 million shares in total, which account for 52.03% of the equity portfolio. As of the end of the first quarter, 13F filings show it was Einhorn’s largest holding. GuruFocus estimates he has gained 359.19% on the long-held investment.

Investors should be aware 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.

About Green Brick

Founded in 2006, Green Brick is a homebuilding and land development company headquartered in Plano, Texas. It currently has operations in Texas, Georgia, Colorado and Florida. The company’s portfolio of brands includes names like Normandy Homes, The Providence Group, Trophy Signature Homes and Challenger Homes.

Its business is divided into three segments, the largest of which, Builder Operations Central, contributed 67.2% of the total revenue in 2022.

Valuation

Green Brick has a $2.42 billion market cap; its shares were trading around $53.24 on Thursday with a price-earnings ratio of 8.59, a price-book ratio of 2.28 and a price-sales ratio of 1.38.

Despite the recent headwinds associated with higher interest rates and inflation, the stock has had a strong performance over the past several years as demand for new housing has remained relatively stable. It has returned over 400% over the past five years, more than 300% over the past three years and 142% over the past year. Year to date, the stock is up 107.58%.

However, the GF Value Line
VALU
suggests the stock is significantly overvalued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.

At 78 out of 100, the GF Score indicates the company is likely to have average performance going forward. While it received high ratings for profitability, growth and financial strength, the momentum and value ranks are low.

Green Brick also has a predictability rank of one out of five stars. GuruFocus found companies with this rank return an average of 1.1% annually over a 10-year period.

Earnings review

In May, Green Brick Partners reported strong first-quarter results.

For the three months ended March 31, the company posted revenue of $452 million and net income of $64 million, or earnings of $1.37 per share. All three figures were up from the prior-year quarter.

Further, the company saw a record number of homes delivered for any first quarter in its history, which came in at 761. Consequently, home closing revenue also grew 24% year over year to $449 million.

In a statement, co-founder and CEO Jim Brickman commented on the “best first-quarter results in our history.”

“More importantly, sales momentum during the first quarter was exceptionally strong,” he said. “Despite a stormy housing environment, net sales accelerated across all our builder brands and were up 78% year-over-year and 152% sequentially to 1,067 homes, the second highest quarter in company history. Not only did we see strong demand in move-in ready homes, but we also experienced a resurgence of orders for build jobs and demand for homes in early construction stages.”

Green Brick’s results for the second quarter should be released in August.

Guru interest

Holding 38.29% of outstanding shares, Einhorn is by far the largest guru shareholder of Green Brick Partners.

As of the first quarter, 13F filings show other investors who own the stock include Hotchkis & Wiley, Diamond Hill Capital (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies and Third Avenue Management (Trades, Portfolio).

Portfolio composition and performance

The guru’s $1.84 billion equity portfolio, which is composed of 39 stocks as of the end of the first quarter, is most heavily invested in the consumer cyclical sector with a weight of 40.29%.

Other stocks in the consumer cyclical space Einhorn held as of March 31 included The ODP Corp. (ODP, Financial), Capri Holdings Ltd. (CPRI, Financial) and Graphic Packaging Holding Co. (GPK, Financial).

According to GuruFocus, Greenlight Capital posted a return on 25.30% in 2022, significantly outperforming the S&P 500’s -18.11% return.

Disclosures

I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours.