David Einhorn, billionaire co-founder and president of Greenlight Capital, has his portfolio heavy on the material and energy sectors.
In his third quarter letter to investors, Einhorn said, "higher oil prices would squeeze the consumer and likely cause a recession."
This might explain Einhorn's swift move towards gold as a safe haven in light of recessionary concerns. Greenlight Capital's stake in GLD (representing safe-haven gold) increased by 89.22% this quarter validating Einhorn's bullishness on the yellow metal.
Material Sector Dominates
Per the hedge fund's third-quarter 13F filing, materials command a good 39.31% of his portfolio.
Material sector stocks and ETFs such as $Green Brick Partners (GRBK.US)$, $SPDR Gold ETF (GLD.US)$, $Teck Resources (TECK.US)$ and $Graphic Packaging (GPK.US)$ feature among his top holdings. Since Q3 2017, the hedge fund mogul has boosted his allocation in the materials sector from 6.44% to 39.31%.
Green Brick, a diversified homebuilding and land development company, is currently Einhorn's no. 1 holding. Greenlight Capital's portfolio is heavily dominated by GRBK, comprising 29.10%, resulting in the firm owning 24.32% of the company.
GLD's allocation in the portfolio has increased from 1.91% to 4.20%, while TECK's share has risen from 2.66% to 3.58%.
Why David Einhorn Is Bullish on Oil
"Having sold down the Strategic Petroleum Reserve and having adopted a policy that discourages drilling for oil, the U.S. has left itself quite vulnerable to higher oil prices. Globally, storage is at a multi-year low," Einhorn said in his Q3 2023 investor letter.
"Our positive net exposure is expressed almost entirely through the energy sector, and we have added a large macro position via futures and options that will benefit from much higher crude oil prices throughout 2024."
Energy Stocks to the Rescue
Einhorn's investment strategy in the energy sector has exhibited a wave-like pattern, alternating between phases of increased and decreased allocations. The current increasing wave started in Q4 2021 when a mere 3.60% of the portfolio was allocated to the energy sector. This has now grown to 23.84%.
Greenlight Capital's primary investments in the energy sector consist of $CONSOL Energy (CEIX.US)$, $Southwestern Energy (SWN.US)$, $Weatherford International (WFRD.US)$, and $Seadrill (SDRL.US)$, with CEIX being the second-largest holding in their portfolio at 14.33%.
Currently, SWN and SDRL make up 3.70% and 0.92% of the portfolio, respectively, with Einhorn significantly increasing his stakes in both this quarter.
$DHT Holdings (DHT.US)$, an independent crude oil tanker company, was a new addition to the portfolio this quarter at 1.18% allocation.