Elite hedge funder David Einhorn touted his investment in a Belgian chemicals company, sending the stock surging 18%

• David Einhorn touted Solvay as a top-five portfolio pick while speaking at the Sohn Conference.

• The Belgian chemical firm has high returns on capital and stable margins, the hedge fund manager said.

• Einhorn said the sell-side analysts who hold a negative view on the company are overlooking its main revenue streams.

Value-investing legend David Einhorn has his eyes set on the Belgian firm Solvay, praising its market potential during a Sohn Conference presentation. Speaking later with CNBC, he said it holds a top-five spot in his portfolio.

"Solvay is a commodity chemical company with a relatively high and stable margin, a high return on capital and a good return of capital," Einhorn outlined on Wednesday. He added: "We think this boring essential chemicals business will generate attractive risk-adjusted returns for investors."

The comments sent Solvay's American depository receipts soaring 18% to $3.22 apiece at 2:45 p.m. ET.

In large part, the company focuses on manufacturing soda ash, a common compound used to produce everything from glass, soaps, to lithium batteries. Though soda ash is not a volatile commodity, COVID distortions have pulled down its capacity utilization, with 2024 set to be a trough year, Einhorn said.

Due to Solvay's ties to soda ash, many sell-side analysts have printed mostly negative reviews of the company, he cited. But these reports have largely ignored the fact that 70% of Solvay's revenue streams come from other chemical products, including peroxides, silica and coatis.

"The point I'm making is that while there is a reduction in soda ash prices and profits in 2024, which everyone knows about, the rest of the business is less cyclical and more resilient," he said. "The bears seem intent on completely ignoring that reality."

What's more, the company is investment-grade rated, with modest leverage and high returns on capital, he said.

While consensus expects earnings of 3.62 euros a share this year, Einhorn said that an European economic recovery should keep the price above 4 euros a share in 2024.

"If management executes on its growth and cost targets, normal earnings per share should [rise] to more than €6 per share,"

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