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.
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.
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.