Billionaire investor David Einhorn made strategic moves in the consumer sector during the first quarter, acquiring a group of four undervalued stocks.
Known for his knack for picking underappreciated and neglected stocks, Einhorn’s latest investments in the consumer industry align with his investment strategy.
1. Victoria’s Secret
Einhorn boosted his holdings in Victoria’s Secret (NYSE: VSCO) by 30% in Q1, making it his eighth-largest investment.
At a recent Sohn conference, he emphasized the brand’s refreshed management, which is revitalizing its core identity, leading to increased customer engagement and more stable traffic. He believes the company has significant growth potential, as its profit margins are currently only about 50% of historical averages.
2. Crocs
Einhorn also acquired shares in Crocs (NASDAQ: CROX), where the brand’s stable sales have been driven by international growth. However, issues persist with its HeyDude brand, which has struggled since its acquisition in 2022, and the company is working to rectify inventory challenges.
Currently, Crocs stock is seen as a bargain with a forward P/E of just 7. The opportunity lies in stabilizing HeyDude, which appears to be improving as its direct-to-consumer sales increased by 8% last quarter.
3. Deckers Outdoor
Einhorn also significantly increased his stake in Deckers Outdoor (NYSE: DECK) by over 60%. The stock has faced challenges after reaching highs earlier but continues to benefit from strong brand performance.
Despite worries over the popularity of its Ugg and Hoka brands, both have shown robust revenue growth. With a forward P/E of 13, this presents an attractive buying opportunity.
4. Peloton
One of Einhorn’s standout acquisitions was in Peloton Interactive (NASDAQ: PTON), increasing his holdings drastically by over 4,000%. Although it’s a small portion of his portfolio, the increase is striking.
Peloton has faced significant challenges post-pandemic, misjudging the surge in demand during lockdowns, leading to overstock issues. Despite revenue declines over the past four years, Peloton has managed to enhance its gross margin, indicating potential for a positive turnaround as it aims to penetrate the commercial gym market.
Disclaimer: Investing involves risk, and the companies mentioned have varying potential for returns. Evaluate all investments carefully.
