At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not CNX Resources Corporation (NYSE:CNX) makes for a good investment right now.
Is CNX a good stock to buy? CNX Resources Corporation (NYSE:CNX) investors should be aware of an increase in support from the world's most elite money managers recently. CNX Resources Corporation (NYSE:CNX) was in 33 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 38. There were 28 hedge funds in our database with CNX holdings at the end of June. Our calculations also showed that CNX isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 66 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
David Einhorn of Greenlight Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. Keeping this in mind let's check out the new hedge fund action regarding CNX Resources Corporation (NYSE:CNX).
Do Hedge Funds Think CNX Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from one quarter earlier. On the other hand, there were a total of 20 hedge funds with a bullish position in CNX a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Southeastern Asset Management, managed by Mason Hawkins, holds the most valuable position in CNX Resources Corporation (NYSE:CNX). Southeastern Asset Management has a $335.9 million position in the stock, comprising 8.7% of its 13F portfolio. The second largest stake is held by Ken Griffin of Citadel Investment Group, with a $64.6 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions contain Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, David Einhorn's Greenlight Capital and Todd J. Kantor's Encompass Capital Advisors. In terms of the portfolio weights assigned to each position Southeastern Asset Management allocated the biggest weight to CNX Resources Corporation (NYSE:CNX), around 8.65% of its 13F portfolio. Cobalt Capital Management is also relatively very bullish on the stock, dishing out 8.03 percent of its 13F equity portfolio to CNX.
As industrywide interest jumped, some big names have been driving this bullishness. Deep Basin Capital, managed by Matt Smith, initiated the biggest position in CNX Resources Corporation (NYSE:CNX). Deep Basin Capital had $8.6 million invested in the company at the end of the quarter. William C. Martin's Raging Capital Management also made a $4.4 million investment in the stock during the quarter. The following funds were also among the new CNX investors: Franklin Parlamis's Aequim Alternative Investments, Paul Marshall and Ian Wace's Marshall Wace LLP, and Mark Coe's Intrinsic Edge Capital.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as CNX Resources Corporation (NYSE:CNX) but similarly valued. These stocks are Macy's, Inc. (NYSE:M), Federal Signal Corporation (NYSE:FSS), JinkoSolar Holding Co., Ltd. (NYSE:JKS), John Wiley & Sons Inc (NYSE:JW), Brandywine Realty Trust (NYSE:BDN), InterDigital, Inc. (NASDAQ:IDCC), and Cronos Group Inc. (NASDAQ:CRON). This group of stocks' market caps match CNX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position M,28,363563,-8 FSS,16,47491,4 JKS,10,42744,2 JW,17,58832,1 BDN,14,22407,2 IDCC,24,321360,1 CRON,10,59912,-4 Average,17,130901,-0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $131 million. That figure was $581 million in CNX's case. Macy's, Inc. (NYSE:M) is the most popular stock in this table. On the other hand JinkoSolar Holding Co., Ltd. (NYSE:JKS) 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 86.1. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 33.3% in 2020 through December 18th but still managed to beat the market by 16.4 percentage points. Hedge funds were also right about betting on CNX as the stock returned 17.7% since the end of September (through 12/18) 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.