We recently compiled a list of 10 Best Stocks to Buy According to Billionaire David Einhorn. In this article, we’ll take a look at where PENN Entertainment, Inc. (NASDAQ: PENN) stacks up against other best stocks to buy according to billionaire David Einhorn.
Markets are broken and getting worse. This is the position championed by billionaire investor David Einhorn, who insists we are in a secular destruction of the professional asset management community. These sentiments come against one of the longest bull runs that have seen valuations in stock markets lose control.
With the S&P 500 hitting record highs after a more than 30% year-to-date gain, Einhorn sees markets as fundamentally broken. Passive investors, without opinions or concerns about value, have been the primary drivers of the market’s rise while avoiding underlying fundamentals. According to Einhorn, passive investors are increasingly buying stock indexes by default, thereby supporting growth stocks at the expense of value stocks.
Likewise, the billionaire hedge fund manager laments that value investors are increasingly marginalized.
“And so effectively, instead of valuation becoming the signal, the valuation people were just noise and everyone else is sort of the signal. And that’s why I think we have a structurally dysfunctional market, a somewhat broken market and essentially a perpetual erosion of value as a strategy, as you would,” Einhorn said in an interview with CNBC.
These sentiments underscore growing concerns that value stocks are becoming increasingly cheaper relative to their underlying fundamentals. Part of the reason is that investors are turning their attention to indexes and growth stocks, leading to excessive valuations. The increased emphasis on growth stocks over value stocks has resulted in one of the most expensive stock markets in decades.
Amid premium valuations, David Einhorn insists there is still value to be unlocked by focusing on value stocks trading at discounted valuations. By focusing on value investing, Einhorn has generated strong long-term returns through Capital green lightthe hedge fund he founded in 1996 with $900,000 from family and friends.
Similarly, Greenlight Capital rose to prominence at the height of the financial crisis, as Einhorn sensed an opportunity to generate returns by shorting the Lehman brothers’ shares. Likewise, she made news in 2002 by shorting Allied Capital, a transaction that was cleared in 2002 by the United States Securities and Exchange Commission.
Since 1996, Greenlight Capital has recorded an average annual return of 13.1%, compared to 9.5% for the S&P 500. The outperformance comes from Einhorn’s emphasis on balancing long exposure and in the short term in investments. Likewise, he recommends monitoring sector risks and insuring against foreseeable macroeconomic threats.
Additionally, stock selection has always been essential as one of Einhorn’s key investment strategies for integrating considerable picture knowledge into successful portfolio management strategies. Diversification, as one of the ways to spread risk, is also one of Einhorn’s key investment strategies.
“Having an eye open to the big picture doesn’t mean abandoning stock picking, but it does mean more actively managing the long-short exposure ratio, worrying about what may be brewing in certain sectors and, where appropriate, just buy some…insurance against predictable macroeconomic risks, even if they are difficult to predict,” Einhorn said.
Letter to Greenlight Capital Investors
To compile a list of the best stocks to buy according to billionaire David Einhorn, we scanned Greenlight Capital’s investment portfolio. We then chose the hedge fund’s largest holdings by analyzing why they stand out and how many hedge funds have stakes in them. Finally, we ranked the stocks in ascending order based on the value of Greenlight Capital’s stake.
At Insider Monkey, we’re obsessed with the stocks that hedge funds are piling into. The reason is simple: our research has shown that we can outperform the market by imitating the stocks selected by the best hedge funds. Our quarterly newsletter strategy selects 14 small- and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Value of Greenlight Capital’s stake: $106.01 million
Number of hedge fund holders: 37
PENN Entertainment, Inc. (NASDAQ: PENN) is a resort and casino company providing integrated entertainment, sports content and gaming experiences. It also operates online sports betting in various jurisdictions. Although the stock is down about 26% for the year, its long-term prospects are strong. The company has a diverse portfolio of 43 properties across 20 states.
Additionally, PENN Entertainment, Inc. (NASDAQ: PENN) is increasingly positioned for growth in online sports betting and iCasino operations. In order to increase market share and reduce losses in the short term, PENN focuses on product quality. PENN has also added new features such as Milestone (WA:MMD) Market Cards to enhance players’ prop betting capabilities,
An important step forward for PENN Entertainment, Inc.’s (NASDAQ: PENN) digital strategy was the collaboration with ESPN for the ESPN Bet platform. Nonetheless, a key part of PENN’s operations is its retail casino division. Consumer activity at the company’s regional casinos has been stable and slot volume trends have been positive. In competitive markets like Iowa, Chicagoland and Louisiana, PENN is investing in strategic developments such as the new Joliet facilities and Margaritaville renovations to mitigate the impact of new casino openings.
Overall, PENN ranks 6th on our list of the best stocks to buy according to billionaire David Einhorn. While we recognize PENN’s growth potential, our conviction lies in the belief that AI stocks hold more promise in terms of higher returns and in a shorter time frame. If you’re looking for an AI stock that’s more promising than PENN but is trading at less than 5x earnings, check out our report on cheapest AI stock.
