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10 Small-Cap Stocks to Buy According to David Einhorn’s Greenlight Capital

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·11 min read
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In this article, we discuss the top 10 small-cap stocks to buy according to David Einhorn's Greenlight Capital. If you want to skip our detailed analysis of these stocks, go directly to 5 Small-Cap Stocks to Buy According to David Einhorn's Greenlight Capital.

David Einhorn founded Greenlight Capital in 1996, and he is the portfolio manager for the hedge fund to date. Under his supervision and direction, a $1.49 billion portfolio is managed for investors, consisting of publicly traded American corporate debt offerings and equities. Greenlight Capital is known for managing a fund of funds, dealing in private equity, and real estate reinsurance services via its subsidiaries and affiliates.

Einhorn graduated from Cornell University in 1991 with a Bachelor’s degree, and started his hedge fund in 1996. He is known for holding short positions in mid-cap equities, and in 2007, he famously shorted the Lehman Brothers stock, stating that the financial services firm had inconsistencies in its accounting records. The company eventually declared bankruptcy in 2008.

According to the 13F filings from September this year, Einhorn’s Q3 portfolio is concentrated with investments in the transports, materials, information technology, industrials, and finance sectors, with a top ten holdings concentration of 73.81%.

10 Small-Cap Stocks to Buy According to David Einhorn's Greenlight Capital
10 Small-Cap Stocks to Buy According to David Einhorn's Greenlight Capital

The most notable stocks from David Einhorn’s portfolio for the third quarter include Twitter, Inc. (NYSE:TWTR), Expedia Group, Inc. (NASDAQ:EXPE), Victoria's Secret & Co. (NYSE:VSCO), and PLBY Group, Inc. (NASDAQ:PLBY), among others discussed in detail below.

Our Methodology

We used the Q3 portfolio of David Einhorn’s Greenlight Capital to select his top 10 small-cap stock picks for the third quarter. The list was compiled according to the value of each holding in Einhorn’s investment portfolio.

Companies with market capitalization ranging from $300 million to $2 billion were considered as small-cap stocks.

Small-Cap Stocks to Buy According to David Einhorn's Greenlight Capital

10. FREYR Battery (NYSE:FREY)

Greenlight Capital’s Stake Value: $6,908,000

Percentage of Greenlight Capital’s 13F Portfolio: 0.46%

Number of Hedge Fund Holders: 20

Market Capitalization as of December 4: $1.124 billion

FREYR Battery (NYSE:FREY) is a Norwegian company offering environmentally friendly battery cells for energy storage, electric mobility, and marine applications. JPMorgan analyst Jose Asumendi on November 18 initiated coverage of FREYR Battery (NYSE:FREY) with a Neutral rating and a $14.70 price target, citing execution risk as the key factor for FREYR Battery (NYSE:FREY) over the next three years to deliver on its medium-term targets.

FREYR Battery (NYSE:FREY) is a new arrival in Einhorn’s Q3 portfolio, with Greenlight Capital holding 700,000 shares in FREYR Battery (NYSE:FREY), worth $6.9 million, representing 0.46% of the firm’s total investments.

With a market cap of $1.12 billion, FREYR Battery (NYSE:FREY) is one of the best small-cap stocks in Einhorn’s portfolio. On November 15, FREYR Battery (NYSE:FREY) announced Q3 earnings, posting an EPS of -$0.42, missing estimates by -$0.33.

At the end of the third quarter, 20 hedge funds in the Q3 database of Insider Monkey were bullish on FREYR Battery (NYSE:FREY), with total stakes worth $378 million.

In addition to Twitter, Inc. (NYSE:TWTR), Expedia Group, Inc. (NASDAQ:EXPE), Victoria's Secret & Co. (NYSE:VSCO), and PLBY Group, Inc. (NASDAQ:PLBY), FREYR Battery (NYSE:FREY) is a notable stock in David Einhorn’s Q3 portfolio.

9. Gulfport Energy Corporation (NYSE:GPOR)

Greenlight Capital’s Stake Value: $8,718,000

Percentage of Greenlight Capital’s 13F Portfolio: 0.58%

Number of Hedge Fund Holders: 18

Market Capitalization as of December 4: $1.371 billion

Gulfport Energy Corporation (NYSE:GPOR), one of the largest producers of natural gas from Oklahoma, posted its Q3 earnings on November 2. EPS in the quarter totaled $3.50, missing estimates by -$0.35. The quarterly revenue equaled -$242.53 million, down 278% year-over-year, missing estimates by $526.53 million.

David Einhorn reduced his position in Gulfport Energy Corporation (NYSE:GPOR) by 18% in the third quarter, holding 106,054 shares in the company, valued at $8.71 million. Gulfport Energy Corporation (NYSE:GPOR) accounts for 0.58% of Einhorn’s total Q3 investments.

As part of his research on the energy sector, Truist analyst Neal Dingmann on October 7 raised the price target on Gulfport Energy Corporation (NYSE:GPOR) to $120 from $94 and kept a Buy rating on the shares.

18 hedge funds in the Q3 database of the 867 elite funds tracked by Insider Monkey reported owning stakes in Gulfport Energy Corporation (NYSE:GPOR), with Edward A. Mule’s Silver Point Capital being the largest stakeholder of the company, holding 8.2 million shares worth $674.78 million.

Here is what Greenlight Capital has to say about Gulfport Energy Corporation (NYSE:GPOR) in its Q2 2021 investor letter:

“Thermal Coal and Natural Gas

ESG investing is inflationary, as green energy is simply more expensive than hydrocarbons. Hydrocarbon energy companies are starved for capital and are being told to change their ways. The result is less exploration and drilling. Even with benchmark oil prices surging over the last year, companies are loath to drill more. Normally, the cure for high prices is high prices. With ESG in the proverbial driver’s seat, we might need much higher prices still in order to increase investment to meet demand.

There is almost nothing less popular than thermal coal. From 2011 to 2020, U.S. coal production declined by 51%. U.S. demand has fallen as we’ve shifted to alternative sources of electricity. As unpopular as coal is though, it still makes up about 20% of U.S. electricity generation. Globally, coal demand is growing modestly as China and India add power generation capacity faster than the West is reducing it. Even so, reduced oil and gas drilling has caused natural gas prices to advance and coal prices are following. Seaborne thermal coal prices are up 140% year-over-year and at the highest levels since 2011, and Northern Appalachia thermal coal prices are catching up, rising 23% in the last month alone.

We also own Gulfport Energy (GPOR), an Appalachian natural gas driller that recently emerged from bankruptcy and is poised to benefit from higher natural gas prices. Currently, there are no analyst estimates for GPOR.”

8. PLBY Group, Inc. (NASDAQ:PLBY)

Greenlight Capital’s Stake Value: $9,664,000

Percentage of Greenlight Capital’s 13F Portfolio: 0.64%

Number of Hedge Fund Holders: 15

Market Capitalization as of December 4: $1.469 billion

PLBY Group, Inc. (NASDAQ:PLBY) is a lifestyle, wellness, and mass media company founded in 1953 by Hugh Hefner to manage the Playboy magazine and similar assets. Greenlight Capital owns 410,000 shares in PLBY Group, Inc. (NASDAQ:PLBY) as of Q3 2021, worth $9.66 million, accounting for 0.64% of the firm’s total investments.

The leading stakeholder of PLBY Group, Inc. (NASDAQ:PLBY) from the third quarter is Michael Novogratz’s Fortress Investment Group, with 2.1 million shares worth $49.9 million. Overall, according to the Q3 database of Insider Monkey, a total of 15 hedge funds were bullish on PLBY Group, Inc. (NASDAQ:PLBY), down from 20 funds in the preceding quarter.

PLBY Group, Inc. (NASDAQ:PLBY), on November 15, announced its Q3 results. EPS in the period equaled -$0.03, missing estimates by -$0.11. The $58.36 million quarterly revenue was up 66.71% from the preceding-year quarter, beating estimates by $693,000.

On November 16, Loop Capital analyst Daniel Adam raised the price target on PLBY Group, Inc. (NASDAQ:PLBY) to $50 from $29 and kept a Buy rating on the shares after the company posted its Q3 results.

In addition to Twitter, Inc. (NYSE:TWTR), Expedia Group, Inc. (NASDAQ:EXPE), Victoria's Secret & Co. (NYSE:VSCO), and PLBY Group, Inc. (NASDAQ:PLBY), PLBY Group, Inc. (NASDAQ:PLBY) is a notable stock in David Einhorn’s Q3 portfolio.

Here is what Greystone Capital Management has to say about PLBY Group, Inc. (NASDAQ:PLBY) in their Q1 2021 investor letter:

“Mountain Crest Acquisition Corp. (MCAC) / Playboy Enterprises (PLBY)

During the quarter, we entered into a mid-sized position in Mountain Crest Acquisition Corp., a SPAC that during late last year inked a deal to merge with Playboy Enterprises (yes, that Playboy) and take the company public. The deal was consummated in February and shares now trade under the ticker symbol PLBY. In line with my occasional attempts to exploit investor biases, the stigma surrounding the Playboy brand especially as it relates to the legacy magazine business helped create the opportunity to purchase shares for what appears to be an incredibly favorable valuation. This is one situation where a SPAC IPO benefitted us greatly as I believe if Playboy underwent the traditional IPO process including roadshow and investment bank involvement, shares wouldn’t have been available anywhere near our initial purchase prices which consisted of an absurdly low EBITDA multiple following the deal close. (Click here to read full text)

7. NeuBase Therapeutics, Inc. (NASDAQ:NBSE)

Greenlight Capital’s Stake Value: $9,844,000

Percentage of Greenlight Capital’s 13F Portfolio: 0.66%

Number of Hedge Fund Holders: 10

Market Capitalization as of December 4: $88.008 million

With a market cap of $88 million, NeuBase Therapeutics, Inc. (NASDAQ:NBSE) is one of the top small-cap stock picks of David Einhorn from the third quarter. Einhorn, via Greenlight Capital, holds a $9.84 million position in NeuBase Therapeutics, Inc. (NASDAQ:NBSE), which accounts for 0.66% of his Q3 investment portfolio.

NeuBase Therapeutics, Inc. (NASDAQ:NBSE) is a company using its advanced platform to rapidly develop targeted drugs for genetic diseases, aiming to prioritize genetic neurological disorders in the drug pipeline.

Out of the 867 hedge funds monitored by Insider Monkey in the third quarter, 10 funds were long NeuBase Therapeutics, Inc. (NASDAQ:NBSE), with Steve Cohen’s Point72 Asset Management being one of the leading company stakeholders, owning 1.25 million shares worth $4.5 million.

Here is what Greenlight Capital had to say about NeuBase Therapeutics, Inc. (NASDAQ:NBSE) in its Q4 2020 investor letter:

“One already-public investment that we have never discussed is NeuBase Therapeutics (NBSE), which we invested in a couple years ago at an average price of $3.96. The combination of the frothy environment for companies with large addressable markets and NBSE’s own pre-clinical progress leaves us surprised that NBSE hasn’t yet joined the “story stock” party. NBSE is a “platform” company with a technology called PATrOL, which develops highly targeted therapies that increase, decrease or change the protein function of genes. By addressing all of the causal mechanisms underlying rare and common diseases – including cancer – PATrOL consolidates the capabilities of highly-valued gene silencing, gene editing and gene replacement companies in a single unified platform. NBSE’s emerging therapies also feature the best precision in engaging misbehaving genes of any technology, which is critical to eliminating “off-target” engagement with healthy genes elsewhere in the genome and to ensuring well-tolerated medicines. The company’s laboratory successes over the last couple years suggest that PATrOL could be a breakthrough technology that addresses many types of diseases. Like DNMR, the addressable market is immense. While there is a long path from here to products on the market, NBSE’s current market capitalization of less than $200 million prices in little chance of success. We think the risk-reward is asymmetrical. NBSE ended the year at $6.99.”

6. Jack in the Box Inc. (NASDAQ:JACK)

Greenlight Capital’s Stake Value: $14,483,000

Percentage of Greenlight Capital’s 13F Portfolio: 0.97%

Number of Hedge Fund Holders: 26

Market Capitalization as of December 4: $1.765 billion

Jack in the Box Inc. (NASDAQ:JACK), an American fast-food restaurant chain, posted its Q3 results on November 23. EPS in the quarter came in at $1.76, beating estimates by $0.02. The $278.45 million revenue gained 9.03% year-over-year, but missed estimates by $10.31 million.

David Einhorn increased his stake in Jack in the Box Inc. (NASDAQ:JACK) by 7% in the third quarter, holding 148,800 shares in the company, worth $14.48 million. Jack in the Box Inc. (NASDAQ:JACK) stock represents 0.97% of Einhorn’s Q3 securities.

Truist analyst Jake Bartlett lowered the price target on Jack in the Box Inc. (NASDAQ:JACK) to $130 from $142 but kept a Buy rating on the shares on November 24. The analyst stated that even though the company is impacted by cost and margin pressures, it is set to recover financially in the upcoming quarters. According to Bartlett, the lower price target presents a strong buying opportunity in Jack in the Box Inc. (NASDAQ:JACK).

Alexander Mitchell’s Scopus Asset Management is the biggest Jack in the Box Inc. (NASDAQ:JACK) stakeholder from Q3, holding a $58.3 million position in the company. Overall, 26 hedge funds were long Jack in the Box Inc. (NASDAQ:JACK) in the third quarter, down from 29 funds in the previous quarter.

In addition to Twitter, Inc. (NYSE:TWTR), Expedia Group, Inc. (NASDAQ:EXPE), Victoria's Secret & Co. (NYSE:VSCO), and PLBY Group, Inc. (NASDAQ:PLBY), Jack in the Box Inc. (NASDAQ:JACK) is a notable stock in David Einhorn’s Q3 portfolio.

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Disclosure: None. 10 Small-Cap Stocks to Buy According to David Einhorn's Greenlight Capital is originally published on Insider Monkey.