David Einhorn was recently eager to slam Chipotle (CMG - Get Report) and Green Mountain Coffee Roasters (GMCR - Get Report). However, he has not backed away from his investment thesis on General Motors (GM - Get Report), the third-biggest holding in his Greenlight Capital fund.
GM went public in 2010 after the auto crisis stemming from the 2008-to-2009 recession, and Einhorn thinks the highly leveraged company stands to benefit from increased demand domestically and rising sales in China and Europe -- all of which are contentious predictions. Einhorn, the president of Greenlight -- which has some $8 billion in assets under management -- is famous for his prophetic anticipation of the Lehman Brothers collapse in 2008. Aside from the GM stake, valued at $344 million as of June 30, Greenlight's top holdings include Apple (AAPL - Get Report) and Seagate Technologies (STX - Get Report), per the fund's 13-F SEC filing.
For the second quarter, General Motors surprised analysts by reporting earnings per shares of $0.90, beating the consensus estimate by $0.11. But, while the company gave reason for hope in its bottom-line figures, it still reported revenue of $37.6 billion, falling short of estimates by about $1 billion. Indeed, in this economic climate, the trend for many different companies involves less and less room for bottom-line growth and sluggish sales.
At the Wednesday's Value Investing Conference in New York, Einhorn said GM expects its international operations to improve, and Einhorn foresees a pick-up in domestic auto sales as well. There is indeed some cause for optimism in regard to both. According to a Scotiabank's Global Auto Report, vehicle sales increased 8% year over year in both July and August. Purchase volume in China also rose 11% -- a significantly higher rate than that of the rest of the international car market. There has been a fair amount of skepticism, however, about whether GM and Ford (F - Get Report) can increase their market share in China (and in Europe), since lighter-sized cars are by far the most popular type in China. Of course, this all depends on execution in both companies in that segment.Einhorn also said at his investor meeting in May that GM is a "misunderstood and very cheap stock." We have previously voiced concern about GM's pensions, which were 88% funded in 2011 -- that is, underfunded by about $25.4 billion. This is weighing the stock down, along with the fact that shares are still being held by the U.S. Treasury.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV