How do we determine whether CONSOL Coal Resources LP (NYSE:CCR) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Hedge fund interest in CONSOL Coal Resources LP (NYSE:CCR) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Park-Ohio Holdings Corp. (NASDAQ:PKOH), VirnetX Holding Corp (NYSE:VHC), and Southern National Bancorp of Virginia, Inc. (NASDAQ:SONA) to gather more data points. Our calculations also showed that CCR isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to 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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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.
[caption id="attachment_25489" align="aligncenter" width="450"] David Einhorn of Greenlight Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. With all of this in mind let's take a gander at the new hedge fund action encompassing CONSOL Coal Resources LP (NYSE:CCR).
How are hedge funds trading CONSOL Coal Resources LP (NYSE:CCR)?
At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2019. On the other hand, there were a total of 4 hedge funds with a bullish position in CCR a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, David Einhorn's Greenlight Capital has the largest position in CONSOL Coal Resources LP (NYSE:CCR), worth close to $74.1 million, accounting for 5.3% of its total 13F portfolio. The second most bullish fund manager is Mountain Lake Investment Management, led by Mitch Cantor, holding a $1.6 million position; the fund has 0.8% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that are bullish comprise Emanuel J. Friedman's EJF Capital, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and . In terms of the portfolio weights assigned to each position Greenlight Capital allocated the biggest weight to CONSOL Coal Resources LP (NYSE:CCR), around 5.33% of its 13F portfolio. Mountain Lake Investment Management is also relatively very bullish on the stock, designating 0.79 percent of its 13F equity portfolio to CCR.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as CONSOL Coal Resources LP (NYSE:CCR) but similarly valued. These stocks are Park-Ohio Holdings Corp. (NASDAQ:PKOH), VirnetX Holding Corp (NYSE:VHC), Southern National Bancorp of Virginia, Inc. (NASDAQ:SONA), and Diplomat Pharmacy Inc (NYSE:DPLO). This group of stocks' market caps resemble CCR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PKOH,8,28571,1 VHC,4,470,1 SONA,9,21060,2 DPLO,10,62382,2 Average,7.75,28121,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $76 million in CCR's case. Diplomat Pharmacy Inc (NYSE:DPLO) is the most popular stock in this table. On the other hand VirnetX Holding Corp (NYSE:VHC) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks CONSOL Coal Resources LP (NYSE:CCR) is even less popular than VHC. Hedge funds dodged a bullet by taking a bearish stance towards CCR. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CCR wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CCR investors were disappointed as the stock returned -32.1% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.