Einhorn picks a familiar investment target: Oil States International

Hedge fund guys love oil rigs.
Hedge fund guys love oil rigs.
Image: AP Photo/Sue Ogrocki
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Are the activists running out of ideas? Or maybe great minds think alike? Hedge fund manager David Einhorn of Greenlight Capital revealed today that the company he had planned to discuss at the Ira Sohn conference was already targeted last week by another activist investor, Jana Partners. Both funds say Oil States International, which provides oil equipment and services, is undervalued and would be better off broken up.

Einhorn, who was speaking at the gathering of hedge fund titans, said he was surprised to see Jana disclose its stake in Oil States last week. As a result, he had “Jana-phylactic shock” and second thoughts about whether he would still go forward with his own presentation on the company at the Sohn conference. In the end, he decided there was more to say, so he went forward.

Einhorn is one of the hedge fund managers whose words are closely followed for investment tips. Most recently, Einhorn publicly put pressure on Apple to return more of its cash to investors. Last month, Apple did just that, and Einhorn said he increased his stake in the iPhone maker.

In 2011 at the Sohn conference, Einhorn said Microsoft CEO Steve Ballmer had to go. In 2008, he criticized the accounting of Lehman Brothers a few months before the bank collapsed. He has also had some misses. Einhorn criticized Green Mountain Coffee Roasters in 2011 and again in 2012, questioning the company’s accounting. Today, Green Mountain reported a jump in first quarter net income to $132.4 million, handily beating analyst estimates.

For Oil States International (OIS), Einhorn said its average peers are trading at four times earnings before interest, taxes, depreciation, and amortization (EBITDA). OIS trades at 6.9 times, but if the company was broken up, the sum of the parts would trade at 8.6 times EBITDA, according to Einhorn. He also said the OIS share price would be $118, compared to the $95 it is trading at now.

Einhorn said he agrees with Jana’s idea that the company should separate its business providing housing on oilfields and turn it into a real estate investment trust. Einhorn added that he wished Jana luck, while Greenlight will sit back and go along for the ride.