Greenlight’s David Einhorn unveils chemicals company Solvay as top investment idea

Published Wed, Apr 3 20241:43 PM EDTUpdated Wed, Apr 3 20245:30 PM EDT

Greenlight's David Einhorn said Wednesday at the Sohn Investment Conference in New York he has bought shares of European chemicals company Solvay . Solvay, which has a $2.6 billion market cap and does not trade in the U.S., is a chemicals and plastics company based Brussels, Belgium that manufactures and distributes chemical and plastics products including peroxides and soda ash. The European market is closed for the day. Solvay shares are down more than 3% year to date. Over the past year, they have tumbled more than 70%. "Solvay is an essential chemical company that holds the number one position across all of its markets" Einhorn said. "While all of these are thought of as commodity businesses, they are higher margin and much more stable than most commodity chemical businesses." Einhorn praised the company's management and capital discipline in his presentation. He also said the valuation is highly attractive. "If management executes on its growth and cost targets, normal earnings per share should [rise] to more than €6 per share," he said. "All told, Solvay is a commodity chemical company with relatively high and stable margin, a higher return on capital." "At 3.7 times targeted 2028 earnings per share with almost a double-digit dividend yield, it seems too cheap," Einhorn added. The investor later told CNBC's Scott Wapner that Solvay is a top-five position in his portfolio. In 2023, Einhorn's hedge fund gained 22.1%, net of fees and expenses, underperforming the S & P 500's 24.2% gain last year. Notably, his fund lost 4.3% in the fourth quarter, when the broad market index rallied more than 11%, after the investor undertook a temporary buyer's strike. Einhorn is one of the most followed hedge fund managers on Wall Street. In 1996, he founded Greenlight Capital, which went on to produce a 26% return on an annualized basis over the next decade. More recently, he has found success in short selling, as well as snapping up value stocks with buyback strategies. — CNBC's Yun Li contributed to this report.