David Einhorn, founder of Greenlight Capital, prefers to earn returns while waiting for the market to recover, a strategy suitable for all investors. He recently stated at the Delivering Alpha conference in November that he has just completed building a position in the agricultural equipment manufacturer CNH Industrial.

"This is an opportunity that is currently largely overlooked because the stock price is cheap, and there may not be good news in the short term," said the hedge fund manager who rose to fame shorting Lehman Brothers during the 2008-2009 financial crisis.

Dilemma in the agriculture market.

Recently, life has indeed become harder for farms. According to FactSet data, Wall Street expects CNH's EPS to be $1 in 2025, down from $1.70 in 2023 and $1.12 in 2024. This trend is primarily attributed to a decrease in agricultural product prices. In 2022, net income for farms in the USA reached a record $182 billion, with corn benchmark prices approaching $6 per bushel. However, by 2024, this price is expected to fall to an average of $4 per bushel, with the USDA predicting net income to drop to around $140 billion. The decline in crop prices means farmers will reduce spending on tractors and combines.

Long-term bullish outlook for CNH's rebound.

However, agriculture is a cyclical industry, and prices will eventually rebound. Einhorn stated that in the next upward cycle, CNH's EPS could reach $2, and the stock price is expected to double. During this period, he can also obtain a 4.1% dividend yield and the company's large share buybacks. In the first nine months of 2024, CNH paid $0.6 billion in dividends and repurchased about $0.689 billion in stocks, reducing the number of outstanding shares by about 6%.

Additionally, CNH is currently undervalued. Einhorn stated, "Based on the 2024 EPS, the PE ratio is about 10 times, while the market average PE ratio is about 23 times, which is very attractive to me." Even in the face of cyclical declines, CNH's dividends remain stable. Over the past 12 months, dividends accounted for about 80% of free cash flow, and Wall Street expects an improvement in free cash flow in 2025.

Other dividend stocks worth paying attention to.

Einhorn's logic also applies to other cyclical stocks, such as ford motor, whirlpool, and lyondellbasell industries. These three stocks are currently undervalued, with ford, whirlpool, and lyondell's pe at 6.1 times, 9.6 times, and 9.4 times respectively.

Ford motor: new car prices have fallen due to dealer inventory backlog.

Whirlpool: appliance sales depend on the sale of existing homes, while current existing home sales have hit a new low since the financial crisis.

Lyondellbasell industries: management mentioned in the third-quarter earnings report that demand is weak for most businesses.

Despite this, Wall Street expects profits for the three companies to grow in 2025 or 2026. During this period, the dividend yield for ford is 5.6%, for whirlpool is 6.4%, and for lyondell is 6.5%. These dividends are relatively safe; it is expected that in 2025, dividends from ford and lyondell will account for 70% of free cash flow, while whirlpool will account for 60%.

It should be noted that whirlpool has relatively high debt, which may be a risk point for investors considering this appliance manufacturer.

If all goes well, investors will enjoy the dual benefits of rising stock prices and healthy dividends; if the recovery is slower than expected, at least stable dividend returns can still be obtained.