After underperforming the broad market at the beginning of the year, energy companies have drawn a significant amount of attention recently. Many members of the sector trade at attractive valuations and offer impressive dividend yields that can be difficult to match in today’s low-interest-rate environment. With that in mind, one well-known hedge fund titan continues to invest in a controversial energy giant.
David Einhorn, founder of Greenlight Capital, added to his position in BP (NYSE:BP) during the first quarter. According to the latest 13-F filing, a quarterly report of equity positions, Greenlight Capital held 1.48 million shares of BP at the end of March, up 51 percent from only 980,000 shares in the prior quarter. Einhorn first started to build a position in BP during the fourth quarter at an average price of $47.39 per share. He believes investors are ignoring the company’s core business and value, and estimates that BP’s net asset value is worth more than 35 percent higher than today’s market price.
“The Deepwater Horizon oil spill was nearly four years ago. Since then, investors have focused on the ensuing legal cases regarding clean-up and restitution efforts, while overlooking BP’s improved return on capital in its core businesses,” said Einhorn in one of his quarterly investment letters. “Allowing for more negative legal outcomes than BP has currently provisioned, we believe the company’s net asset value is nearly $70 per share.”