Should You Avoid CONSOL Energy Inc. (CEIX)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtCONSOL Energy Inc. (NYSE:CEIX) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Is CONSOL Energy Inc. (NYSE:CEIX) the right pick for your portfolio? The best stock pickers were in a bearish mood. The number of long hedge fund positions dropped by 5 lately. Our calculations also showed that CEIX isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Clint Carlson of Carlson Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a glance at the latest hedge fund action encompassing CONSOL Energy Inc. (NYSE:CEIX).

Hedge fund activity in CONSOL Energy Inc. (NYSE:CEIX)

At Q1’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -29% from one quarter earlier. On the other hand, there were a total of 19 hedge funds with a bullish position in CEIX a year ago. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

The largest stake in CONSOL Energy Inc. (NYSE:CEIX) was held by Mountain Lake Investment Management, which reported holding $2.9 million worth of stock at the end of September. It was followed by Marshall Wace LLP with a $1.2 million position. Other investors bullish on the company included Winton Capital Management, Carlson Capital, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Mountain Lake Investment Management allocated the biggest weight to CONSOL Energy Inc. (NYSE:CEIX), around 2.78% of its 13F portfolio. Voss Capital is also relatively very bullish on the stock, dishing out 0.04 percent of its 13F equity portfolio to CEIX.

Judging by the fact that CONSOL Energy Inc. (NYSE:CEIX) has witnessed declining sentiment from the entirety of the hedge funds we track, we can see that there exists a select few money managers that slashed their full holdings by the end of the first quarter. At the top of the heap, David Einhorn’s Greenlight Capital sold off the largest investment of all the hedgies watched by Insider Monkey, totaling close to $8.9 million in stock, Renaissance Technologies was right behind this move, as the fund dumped about $1.5 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 5 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as CONSOL Energy Inc. (NYSE:CEIX) but similarly valued. We will take a look at Cumulus Media Inc (NASDAQ:CMLS), Electromed, Inc. (NYSE:ELMD), Express, Inc. (NYSE:EXPR), and PhaseBio Pharmaceuticals, Inc. (NASDAQ:PHAS). This group of stocks’ market caps resemble CEIX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CMLS 8 26960 -5
ELMD 4 2473 3
EXPR 13 37262 1
PHAS 7 7932 -1
Average 8 18657 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $19 million. That figure was $7 million in CEIX’s case. Express, Inc. (NYSE:EXPR) is the most popular stock in this table. On the other hand Electromed, Inc. (NYSE:ELMD) 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. 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 gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on CEIX as the stock returned 37.4% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Follow Consol Energy Inc. (NYSE:CEIX)

Disclosure: None. This article was originally published at Insider Monkey.