Key Takeaways from David Einhorn at Delivering Alpha 2024
My notes on David Einhorn's presentation at Delivering Alpha 2024. The market is expensive; the death of active asset management? Is value investing eroding?
Political Stability and Inflation Outlook
Einhorn found the election outcome unexpectedly decisive, which he sees as beneficial for political stability.
His fund has increased its bets on inflation, predicting another rise due to the administration's expansionary policies.
He expects inflation to be higher than consensus forecasts, around 3.5% to 4.5%, but not at previous peaks of 7-9%.
Expansionary policies, tax cuts, full employment, wage growth, and immigration policies will contribute to inflation.
The FED and Fiscal Policy
He highlights that while the Fed is "independent," its primary responsibility is ensuring the Treasury market functions properly.
He suggests the U.S. is nearing fiscal dominance, where monetary policy is dictated by fiscal policy.
The bond market is not fully pricing in the risk of ballooning deficits, despite an expansionary policy environment.
Stock Market and Greenlight’s Strategy
David acknowledges that the market is the most expensive he has seen since founding Greenlight Capital.
Despite high valuations, he is not outright bearish, as overvalued markets can persist for long periods.
He finds hidden value in forgotten stocks—businesses that are cheap but unloved.
His strategy balances finding value in beaten-down stocks while shorting overvalued and deteriorating companies.
Current Long Positions
CNH Industrial (Case New Holland)
A tractor and combine manufacturer.
Currently in a cyclical downturn, but trading at 10x trough earnings.
Pays a 3-4% dividend and is buying back 5-6% of shares.
Einhorn expects an agricultural equipment upcycle in 2026, potentially doubling the stock price.
Peloton (PTON)
Trading 95% below its peak with 3 million engaged subscribers.
He sees significant cost-cutting opportunities, as the company previously overspent.
A leaner cost structure could double profits, while the bull case requires growing new subscribers.
Third Position (Undisclosed)
Einhorn did not reveal his third major long position.
Value Investing is Being Eroded
Einhorn argues that fundamental, long-term value investing is being eroded in today's market.
Short-term data points and expectations management dominate stock trading, reducing valuation-based investing.
The market has become dysfunctional, favoring momentum and growth stocks at extreme valuations.
However, he finds opportunities in unloved sectors where companies return capital via dividends and buybacks.
The Death of Active Asset Management?
Active management is shrinking, particularly long-term fundamental investing.
Passive investing dominates, with little regard for valuation, making the market less efficient.
Many active managers focus on quarterly beats and misses, rather than intrinsic value.