Value Investing

David Einhorn: Short Heavy Equipment

Failing his recent Netflix and Amazon short implosions, David Einhorn is now trying his hand in heavy construction – betting that the downturn in commodities isn’t just a cyclical issue, but a fundamental one.

Einhorn’s comment:

“Bulls are assuming the current commodity environment is an ordinary cyclical downturn. We believe it is the end of a commodity supercycle, and this will exert a long period of earnings headwinds for these companies.”

Now, Einhorn does have a long position in CONSOL Energy, which goes against his commodity comment. However, it’s more of a natural gas play, with a coal-kicker. Nonetheless, there are some obvious companies that Einhorn might be targeting – Caterpillar, Terex, Manitowoc and Joy Global.

He’d have good company  in Caterpillar, where Jim Chanos has been a notable bear. Terex is getting bought out and Manitowoc in the middle of a split up – thus, it appears that Joy is the likely target.

Joy’s stock is already down 70% in the last twelve months and in a world of pain, trading at post-financial crisis levels, but when it rains it pours.

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