Equities

Einhorn's Endorsement Boosts Solvay ADRs by Nearly 14%

Einhorn's Greenlight Capital invests in Solvay, boosting shares by nearly 14%, highlighting value in essential chemicals sector.

By Alex P. Chase

4/3, 17:35 EDT
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Key Takeaway

  • David Einhorn's Greenlight Capital invests in Solvay SA, driving its ADRs up nearly 14%, highlighting the value of essential chemicals.
  • Einhorn champions value investing amidst passive investing trends, seeing opportunities in undervalued companies like Solvay.
  • Greenlight Capital boasts a 22.1% gain in 2023, with strategic investments in companies with solid fundamentals and essential industry roles.

Einhorn Endorses Solvay

David Einhorn, the founder of Greenlight Capital, has made headlines by announcing his hedge fund's investment in Solvay SA, a Belgium-based chemicals company, during the Sohn Investment Conference in Manhattan. Following Einhorn's endorsement, Solvay's American depository receipts saw a nearly 14% increase in value. Einhorn highlighted Solvay's position as a major producer of soda ash and other essential chemicals, noting its plans to expand capacity by 7% in Wyoming. He praised the company for its above-average management and its potential to generate attractive, risk-adjusted returns for investors. Einhorn's backing comes at a time when he has voiced concerns over the challenges facing value investing, citing the rise of passive investing as a factor that has left markets "fundamentally broken."

Market Dynamics and Value Investing

Einhorn's investment philosophy has long championed value investing, a strategy that seeks out undervalued companies with strong fundamentals. Despite the growing popularity of passive index-tracking funds, which Einhorn believes has diminished the role of active management and value investing, he remains optimistic about the opportunities available for discerning investors. Einhorn's track record includes a notable call to short Lehman Brothers at the 2008 Sohn Conference, underscoring his ability to identify undervalued or overvalued assets. His recent investment in Solvay aligns with his belief that there are still "cheap stocks that are cheaper than they otherwise would be," due to the reduced competition in value investing.

Greenlight Capital's Strategic Moves

Under Einhorn's leadership, Greenlight Capital has navigated market downturns and identified opportunities for growth, achieving a 22.1% gain net of fees in 2023. The hedge fund's strategy focuses on investing in companies with solid fundamentals and essential roles in their industries. In addition to Solvay, Greenlight has recently acquired stakes in Kenvue Inc. and Teva Pharmaceutical Industries Ltd., further diversifying its portfolio. Despite a slight underperformance compared to the S&P 500, Greenlight's approach has yielded significant returns, including a remarkable 26% annualized return over a decade. Einhorn's investment in Solvay reflects his ongoing commitment to value investing and his confidence in the company's future growth.

Street Views

  • David Einhorn, Greenlight Capital (Bullish on Solvay SA):

    "Solvay, a major producer of soda ash and other inorganic compounds... The business has higher margins than typical commodities producers, while the stock trades at just seven times expected 2024 earnings."