Yahoo Finance David Einhorn: Short Caterpillar
Hedge fund manager David Einhorn reveals Caterpillar short position
Hedge fund manager David Einhorn, the founder of Greenlight Capital, is short Caterpillar (CAT).
Speaking at the 21st annual Sohn Conference in New York, Einhorn said that the market thinks that Caterpillar’s business is at the bottom.
“But is it really at or near trough?” he asked.
Instead, Einhorn thinks that its much closer midcycle. He believes that Caterpillar will bottom in 2018. He also thinks that it will trade at half of its current price.
The stock ended Wednesday down 2.8% at $74.24 per share. The stock was last down more than 1% in the after-hours session.
During his presentation, Einhorn explained that Caterpillar’s business is in resources, construction, and energy and transport.
Caterpillar makes machines for used in mining. Einhorn pointed to the collapse in mining. Two of the main drivers in for Caterpillar’s resources business are coal and iron ore. Both consumption in coal and ore have fallen, he said.
Meanwhile, construction spending has fallen. What’s more is some developers have been renting equipment rather than owning it.
The energy and transport part of the business is a more complicated picture, Einhorn said.
He pointed out that Caterpillar provides equipment for fracking rigs and offshore rigs.
Einhorn said that with low oil prices a “good portion” of that equipment is sitting idle and that will be “a headwind to new sales.”
The Sohn Conference is an event raises funds for pediatric cancer. It’s the same even where Einhorn presented his famous Allied Capital short.
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Julia La Roche is a finance reporter at Yahoo Finance.
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