Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Green Brick Partners Are Up Today

By Bram Berkowitz – Oct 20, 2021 at 3:26PM

Key Points

  • Greenlight Capital, a major shareholder of Green Brick Partners, noted the company's strong returns in its Q3 letter to investors.
  • Greenlight Capital also remains positive on the housing market.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A major shareholder in the company released some bullish comments on the homebuilding company and the state of the U.S. housing market.

What happened

Shares of the homebuilder and development company Green Brick Partners (GRBK 1.09%) rose as much as 13% today after one of its major shareholders released bullish comments about the stock.

So what

David Einhorn, president and founder of Greenlight Capital, is one of Green Brick's largest shareholders, owning 34.4% of the company's outstanding common shares.

In Greenlight's Q3 letter to investors, Einhorn noted that while shares of Green Brick fell nearly 10% in Q3, he couldn't really explain why. In the second quarter, Einhorn noted that the company significantly grew earnings year over year and easily beat consensus estimates, generating a 30% return on equity.

Einhorn also wrote that while he has heard the argument about how higher home values and excessive home building may deter homebuyers, he has seen no evidence of this yet. "Demand remains very strong, and with rents rising quickly, owning is becoming a more attractive option," he wrote.

Green squiggly line moving upward.

Image source: Getty Images.

Now what

I agree with Einhorn's analysis. Green Brick is generating strong returns and while there may be a lot of home building, there is also a shortage of housing in the U.S. Green Brick is also in markets with strong population growth like Texas and Florida. Trading a bit above six times forward earnings, I certainly like Green Brick at this valuation.

Bram Berkowitz has the following options: long February 2022 $30 calls on Green Brick Partners and long February 2022 $35 calls on Green Brick Partners. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.