Longleaf Partners Fund, a Memphis-based fund under Southeastern Asset Management, published its “Longleaf Partners Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. Longleaf Partners Fund fell 5.70% in the third quarter, while the S&P 500 Index returned 0.58%. The Fund remains ahead of the index year-to-date (YTD), up 16.38% vs. the S&P’s 15.92%. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Longleaf Partners Fund, in its Q3 2021 investor letter, mentioned CNX Resources Corporation (NYSE: CNX) and discussed its stance on the firm. CNX Resources Corporation is a Canonsburg, Pennsylvania-based natural gas company with a $3 billion market capitalization. CNX delivered a 35.83% return since the beginning of the year, while its 12-month returns are up by 47.88%. The stock closed at $14.67 per share on November 12, 2021.
Here is what Longleaf Partners Fund has to say about CNX Resources Corporation in its Q3 2021 investor letter:
“Finally, had you told us two years ago that CNX would 1) accretively buy in its pipeline assets to be the low-cost player in the basin; 2) further lock in FCF with hedges; 3) buy back a material amount of shares to grow FCF/share power above $2; 4) finally see more E&P industry consolidation, we would not have expected a sub-$12 stock price. But now that gas prices are up, hedges are viewed by the market as a negative, and sellsiders struggle for a short-term “catalyst.” We expect CNX to create more catalysts and continue to take advantage of its dramatically undervalued stock price.”
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Based on our calculations, CNX Resources Corporation (NYSE: CNX) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. CNX was in 30 hedge fund portfolios at the end of the first half of 2021, compared to 23 funds in the previous quarter. CNX Resources Corporation (NYSE: CNX) delivered a -9.87% return in the past 3 months.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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Disclosure: None. This article is originally published at Insider Monkey.
