Billionaire David Einhorn Bought Millions of Shares of General Motors Company (NYSE:GM)

General MotorsClosely followed billionaire investor David Einhorn bought millions of shares of General Motors Company (NYSE:GM). Should you follow?

According to his hedge fund’s most recent SEC filing, David Einhorn increased his stake in General Motors by 55% in the second quarter of 2015. By the end of June, the billionaire investor owned 14.65 million shares of General Motors, worth approximately $488.1 million. GM also represented 6.12% of his hedge fund’s holdings. (Source: The Securities and Exchange Commission, last accessed September 4, 2015.)

The founder and president of Greenlight Capital has become famous for calling out companies with problems. He has a solid track record, shorting Allied Capital, Lehman Brothers, and KeurigGreen Mountain, Inc. (NASDAQ:GMCR) stocks.

As of market close on Friday September 4th, General Motors’ stock price was $28.71. The company has a price-to-earnings ratio (P/E) of 10.66, which is lower than the other two of the “big three:” Ford Motor Co. has a P/E of 14.64, while Fiat Chrysler Automobiles has a P/E of 17.24. Note that General Motors is also paying dividends; with a dividend yield of 4.98%.

Einhorn’s renewed interest in GM might come from the company’s new plan of returning cash to investors.

$5.0 Billion Buyback

Earlier this year, a group of investors threatened to mount a proxy fight for board seats in order to push GM to return some cash to shareholders. To resolve the issue, the company approved a $5.0 billion share buyback program. The program started in March and would conclude before the end of 2016. (Source: General Motors, last accessed September 4, 2015.)

To return value to investors, GM also increased its dividends to 36 cents per share in the second quarter. The expected dividend payout would total approximately $5.0 billion by the end of 2016. Combined with the share repurchase program, GM is on its way to return $10.0 billion to investors.

Note that Einhorn is not the only hedge fund manager that increased their stake in General Motors. David Tepper, founder of Appaloosa Management, bought an additional 3.5 million shares of GM in the second quarter of 2015. Tepper had a total of 18.8 million shares by the end of June, valued at around $626.5 million and made up 15.51% of his hedge fund’s holdings.