As Dow Jones and S&P 500 Indices plunged on Monday amid concerns over Greece, a group of companies has enjoyed strong gains. The Dow Jones Coal Index inched up by more than 0.1% in Intraday trading, as the Supreme Court ruled against the U.S. Environmental Protection Agency (EPA) over the rules that restrict the emissions of mercury and other air pollutants mainly from coal-fired power plants. In this way, several stocks jumped on the back of the news, including Peabody Energy Corporation (NYSE:BTU), Walter Energy, Inc. (NYSE:WLT), and Arch Coal Inc (NYSE:ACI). Let’s see what the hedge funds’ insight on these stocks is, and how they benefitted from the gains registered by these companies.
We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular stock picks in real time since the end of August 2012. These stocks have returned 142% since then and outperformed the S&P 500 Index by 84 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.
Peabody Energy Corporation (NYSE:BTU) is the largest in terms of market cap from the lot and its stock is up by almost 10% on Monday so far. The appreciation of the stock is not surprising, since Peabody is engaged in mining of thermal coal, which is then sold to energy plants, as well as metallurgical coal to industrial customers. Despite the today’s gain, the stock of Peabody Energy Corporation (NYSE:BTU) has lost 70% since the beginning of the year, which put a strain on hedge funds’ sentiment. As of the end of March, a total of 19 investors, among those we track, disclosed long positions in Peabody Energy, down from 29 a quarter earlier. However, the aggregate value of these funds’ holdings, has not decreased so significantly – to $225.96 million from $239.86 million. One of the main reasons for that is the new stake initiated by Dmitry Balyasny‘s Balyasny Asset Management, which contained 27.31 million shares, worth $134.34 million at the end of March. In addition, many of the top shareholders in our list have substantially increased their stakes in Peabody Energy Corporation (NYSE:BTU) during the first three months of the year. Among them are funds managed by billionaires Ken Griffin and Jim Simons. However, billionaire Israel Englander‘s Millennium Management has been betting against Peabody, as it owns a substantial ‘Put’ position underlying shares of the company.
Arch Coal Inc (NYSE:ACI) and Walter Energy, Inc. (NYSE:WLT) are both nano-cap companies with market caps of $84 million and $15 million respectively. Both stocks registered gains north of 10% on Monday, although in year-to-date terms, both stocks are down by more than 70%.
Due to their small sizes, Arch Coal Inc (NYSE:ACI) and Walter Energy have not attracted a lot of attention from big investors. In addition, the data show a significant outflow of capital from both companies registered in the first three months of the year. In Arch Coal, 13 funds held $12.78 million worth of stock at the end of March, versus 14 funds with $21.78 million in stock a quarter earlier. However, the decline in the aggregate value of the positions can be attributed to the drop of the stock, since there haven’t been many major changes among the holdings. Douglas Dethy’s DC Capital Partners with 5.0 million shares is the largest stockholder of Arch Coal Inc (NYSE:ACI), among the investors we track, followed by Robert Vollero And Gentry T. Beach’s Vollero Beach Capital Partners, which upped its stake by 430% to 2.46 million shares, which is the only large increase registered in the first quarter. In addition, among billionaires, Israel Englander’s Millennium Management cut its stake by 67% to some 253,800 shares, while Jim Simons‘ Renaissance Technologies initiated a position with 250,200 shares of Arch Coal Inc (NYSE:ACI) during the first three months of 2015.
In Walter Energy, Inc. (NYSE:WLT), the number of funds with long positions declined to 12 from 16, but the total value of their positions slid to only $3.83 million from $14.43 million at the end of December. A number of investors closed previously held stakes during the first quarter, including Randall Smith’s Alden Global Capital, which owned 2.44 million shares at the end of December (it was the largest stake among the funds we track at the time). Ari Zweiman’s 683 Capital Partners, Millennium Management, GRT Capital Partners were also among the investors closing their positions in Walter Energy, Inc. (NYSE:WLT) during the first three months. On the other hand, Renaissance Technologies initiated a stake with 358,700 shares and another billionaire, David E. Shaw’s D.E. Shaw upped its holding by 150% to 319,500 shares during the same period.
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