Greenbrier Companies (GBX): A Billionaire's Caution or Contrarian Play in Railroad Stocks?

The railroad sector has long been a barometer of economic health, and Greenbrier Companies (GBX), a leading manufacturer and seller of railcars and transportation equipment, finds itself at the center of a debate among institutional investors. As of early 2025, billionaire-backed funds have sent mixed signals about GBX’s prospects: some are pulling back, while others are doubling down. This article dissects the institutional ownership data, market dynamics, and strategic moves to determine whether GBX deserves a spot in your portfolio.

The Billionaire Playbook: Contractions and Contrarian Bets

The latest 13F filings reveal stark divergences in how billionaire-linked funds are positioning themselves toward GBX:

1. Citadel Advisors (Ken Griffin):
   Reduced holdings by 22.16% to 112,098 shares, signaling a retreat. However, Citadel also increased put options—a bearish bet—by 9.36%, suggesting skepticism about near-term price recovery. Meanwhile, call options (bullish bets) fell by nearly 50%, reflecting a broader shift toward downside protection.

1. Millennium Management (Israel Englander):
   Cut holdings by 31.14%, dropping to 205,917 shares. This reduction aligns with a 17.47% decline in the stock’s value in their portfolio, underscoring a loss of confidence.

2. BlackRock (Larry Fink):
   The world’s largest asset manager slashed its stake by 18.22%, trimming holdings to 2,055,333 shares. This move reflects broader market sentiment, as GBX’s stock has dropped 19.53% over the past year (from $53.26 to $42.86).

1. Two Sigma (David Siegel & John Overdeck):
   A modest 5.77% increase to 35,900 shares suggests cautious optimism, but this pales compared to Encompass Capital Advisors, which nearly doubled its stake (+51.29%) to 56,735 shares. Encompass’s aggressive buying—amid the broader sell-off—hints at a contrarian view that GBX is undervalued.

Why the Divide Among Billionaire Funds?

The mixed signals stem from competing narratives about GBX’s future:

• Bearish Case:
  The railroad sector faces headwinds like declining freight volumes, supply chain disruptions, and overcapacity in railcar inventories. GBX’s revenue growth has slowed, and its stock has underperformed peers like Kansas City Southern (KSU) or Canadian National Railway (CNI). The 19.53% price drop since April 2024 may reflect investor fears of a prolonged downturn.

• Bullish Case:
  Encompass Capital’s bet points to long-term opportunities. GBX’s backlog of railcar orders remains robust, and it has a 6.60% ownership stake in the company via BlackRock’s holdings (though diluted). Additionally, the global shift toward rail transport for bulk commodities like coal and grain could boost demand for Greenbrier’s products.

Key Metrics to Watch

• Backlog of Orders: GBX’s order backlog is a critical indicator of future revenue. A sustained backlog above $1.5 billion would signal resilience.
• Operating Margins: If margins hold above 10% despite rising costs, it could validate management’s efficiency.
• Stock Valuation: At $42.86, GBX trades at a P/E ratio of 12.5x (based on 2024 earnings). This is below its five-year average of 15x, suggesting potential undervaluation.

Conclusion: A Contrarian Opportunity or a Fallen Angel?

The billionaire-linked funds’ actions paint a nuanced picture. While heavyweights like Citadel and Millennium are scaling back, Encompass Capital’s bold increase signals a belief in GBX’s undervalued position. However, the stock’s 19.53% annual decline and institutional sell-offs suggest lingering risks.

Investors should consider two paths:
1. Bull Case: If railcar demand rebounds (e.g., due to infrastructure spending or energy exports), GBX’s 6.60% institutional ownership concentration could fuel a recovery.
2. Bear Case: Persistent softness in freight volumes or overproduction of railcars might keep GBX depressed.

In short, GBX is not a “best railroad stock” for everyone. It’s a high-risk, high-reward play suited for investors who can stomach volatility and believe in a cyclical rebound. For now, the data leans cautiously neutral, but Encompass’s contrarian stance makes GBX worth monitoring closely.

Final Takeaway:
Billionaire funds are split, but the institutional put/call ratio—highlighted by Citadel’s increased puts—hints at lingering bearish sentiment. Investors should pair GBX with stronger railroad peers (e.g., CNI) for diversification and consider a gradual entry if the stock dips below $40. The next earnings report and backlog updates will be critical in determining whether this is a contrarian gem or a fading star.