Einhorn's Greenlight Capital Backs Solvay's Expansion Plans

Einhorn endorses Solvay with a long bet, highlighting its essential chemicals market dominance despite a 70% share tumble.

By Bill Bullington

4/3, 15:05 EDT

Key Takeaway

  • David Einhorn's Greenlight Capital invests in Solvay SA, causing a 13% surge in its American depositary receipts.
  • Despite a challenging market, Einhorn praises Solvay's management and expansion plans, signaling confidence in its future growth.
  • Greenlight Capital, under Einhorn's strategy focusing on undervalued companies with strong fundamentals, gained 22.1% net of fees in 2023.

Einhorn Backs Solvay

David Einhorn, the founder of Greenlight Capital, has publicly announced his investment in Solvay SA, a leading European essential chemicals company. This endorsement came during the Sohn Investment Conference in New York, where Einhorn shared his positive outlook on Solvay's future. Following his comments, Solvay’s American depositary receipts experienced a 13% surge in value. Einhorn praised Solvay for its management quality and its strategic plans to expand soda ash capacity by 7% in Wyoming, highlighting the company's strong position in the market for essential chemicals like soda ash, peroxides, solvents, and silica.

Market Position and Performance

Solvay, headquartered in Brussels, Belgium, is recognized for its dominant market position across all its product lines, according to Einhorn. Despite a challenging year with shares down more than 3% year to date and a significant drop over the past year, Einhorn remains confident in Solvay's stability and high-margin businesses. This confidence is notable against the backdrop of Solvay's share performance, which has seen a more than 70% tumble over the past year. Einhorn's investment is a strong vote of confidence in Solvay's essential role in the chemical industry and its potential for future growth.

Greenlight Capital's Strategy

Under David Einhorn's leadership, Greenlight Capital has demonstrated a keen ability to navigate market downturns and identify undervalued companies with strong growth potential. Despite a slight underperformance compared to the S&P 500 in 2023, Greenlight Capital achieved a 22.1% gain, net of fees and expenses. Einhorn's investment philosophy focuses on companies with solid fundamentals and essential roles in their respective industries, a strategy that has yielded significant returns in the past, including a remarkable 26% annualized return over a decade.

Street Views

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

    "We think this boring essential-chemicals business will generate attractive, risk-adjusted returns for investors." "It’s a great time to be a value investor, as competition is so small that the opportunities to find companies with cash-on-cash returns are more abundant than at any time in my career other than at the bottom of a bear market."