How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding CNX Resources Corporation (NYSE:CNX) and determine whether hedge funds had an edge regarding this stock.
CNX Resources Corporation (NYSE:CNX) has experienced an increase in enthusiasm from smart money recently. CNX Resources Corporation (NYSE:CNX) was in 28 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 38. Our calculations also showed that CNX isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are numerous signals market participants can use to size up stocks. A couple of the most underrated signals are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the top investment managers can outperform the market by a superb amount (see the details here).
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind let’s take a glance at the key hedge fund action encompassing CNX Resources Corporation (NYSE:CNX).
What have hedge funds been doing with CNX Resources Corporation (NYSE:CNX)?
At Q2’s end, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CNX over the last 20 quarters. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Southeastern Asset Management, managed by Mason Hawkins, holds the largest position in CNX Resources Corporation (NYSE:CNX). Southeastern Asset Management has a $319.9 million position in the stock, comprising 8% of its 13F portfolio. Coming in second is Encompass Capital Advisors, led by Todd J. Kantor, holding a $28.7 million position; the fund has 3.8% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions comprise David Einhorn’s Greenlight Capital, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Southeastern Asset Management allocated the biggest weight to CNX Resources Corporation (NYSE:CNX), around 7.98% of its 13F portfolio. Cobalt Capital Management is also relatively very bullish on the stock, dishing out 5.44 percent of its 13F equity portfolio to CNX.
As one would reasonably expect, key hedge funds have been driving this bullishness. Encompass Capital Advisors, managed by Todd J. Kantor, created the largest position in CNX Resources Corporation (NYSE:CNX). Encompass Capital Advisors had $28.7 million invested in the company at the end of the quarter. Wayne Cooperman’s Cobalt Capital Management also initiated a $9.5 million position during the quarter. The other funds with new positions in the stock are Cliff Asness’s AQR Capital Management, Mark G. Schoeppner’s Quaker Capital Investments, and David Greenspan’s Slate Path Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as CNX Resources Corporation (NYSE:CNX) but similarly valued. We will take a look at Adtalem Global Education Inc. (NYSE:ATGE), Columbia Financial, Inc. (NASDAQ:CLBK), Minerals Technologies Inc (NYSE:MTX), Vaxcyte, Inc. (NASDAQ:PCVX), ShockWave Medical, Inc. (NASDAQ:SWAV), SPX FLOW, Inc. (NYSE:FLOW), and Hostess Brands, Inc. (NASDAQ:TWNK). All of these stocks’ market caps match CNX’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.3 hedge funds with bullish positions and the average amount invested in these stocks was $180 million. That figure was $496 million in CNX’s case. Hostess Brands, Inc. (NASDAQ:TWNK) is the most popular stock in this table. On the other hand Columbia Financial, Inc. (NASDAQ:CLBK) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks CNX Resources Corporation (NYSE:CNX) is more popular among hedge funds. Our overall hedge fund sentiment score for CNX is 81.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 21.3% in 2020 through September 25th but still managed to beat the market by 17.7 percentage points. Hedge funds were also right about betting on CNX as the stock returned 20% since the end of June and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.