“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on CONSOL Energy Inc. (NYSE:CEIX) in order to identify whether reputable and successful top money managers continue to believe in its potential.
Is CONSOL Energy Inc. (NYSE:CEIX) a healthy stock for your portfolio? Hedge funds are getting less optimistic. The number of bullish hedge fund bets were cut by 6 lately. Our calculations also showed that ceix isn’t among the 30 most popular stocks among hedge funds. CEIX was in 19 hedge funds’ portfolios at the end of the first quarter of 2019. There were 25 hedge funds in our database with CEIX holdings at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Noam Gottesman, GLG Partners
We’re going to go over the recent hedge fund action regarding CONSOL Energy Inc. (NYSE:CEIX).
Hedge fund activity in CONSOL Energy Inc. (NYSE:CEIX)
Heading into the second quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -24% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CEIX over the last 15 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Ken Griffin’s Citadel Investment Group has the largest position in CONSOL Energy Inc. (NYSE:CEIX), worth close to $30.5 million, comprising less than 0.1%% of its total 13F portfolio. The second largest stake is held by Mountain Lake Investment Management, led by Mitch Cantor, holding a $17.6 million position; 6.5% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that are bullish include Jim Simons’s Renaissance Technologies, Noam Gottesman’s GLG Partners and Robert Polak’s Anchor Bolt Capital.
Due to the fact that CONSOL Energy Inc. (NYSE:CEIX) has witnessed a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of fund managers who sold off their positions entirely heading into Q3. At the top of the heap, Paul Marshall and Ian Wace’s Marshall Wace LLP dropped the largest position of all the hedgies followed by Insider Monkey, totaling about $4.8 million in stock, and Parvinder Thiara’s Athanor Capital was right behind this move, as the fund sold off about $1.2 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 6 funds heading into Q3.
Let’s check out hedge fund activity in other stocks similar to CONSOL Energy Inc. (NYSE:CEIX). These stocks are Denbury Resources Inc. (NYSE:DNR), Rhythm Pharmaceuticals, Inc. (NASDAQ:RYTM), Knoll Inc (NYSE:KNL), and Compass Diversified Holdings LLC (NYSE:CODI). This group of stocks’ market valuations are similar to CEIX’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DNR | 17 | 43885 | -4 |
| RYTM | 11 | 188006 | 1 |
| KNL | 19 | 55434 | -3 |
| CODI | 4 | 4172 | 0 |
| Average | 12.75 | 72874 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $73 million. That figure was $130 million in CEIX’s case. Knoll Inc (NYSE:KNL) is the most popular stock in this table. On the other hand Compass Diversified Holdings LLC (NYSE:CODI) is the least popular one with only 4 bullish hedge fund positions. CONSOL Energy Inc. (NYSE:CEIX) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately CEIX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CEIX were disappointed as the stock returned -22.9% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
