Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors' favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the third quarter. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds' top consensus picks. This year hedge funds' top 20 stock picks outperformed the S&P 500 Index by 4 percentage points through September 30th. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.
Is CONSOL Coal Resources LP (NYSE:CCR) a buy right now? Hedge funds are in a bearish mood. The number of bullish hedge fund bets fell by 1 recently. Our calculations also showed that CCR isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a peek at the latest hedge fund action regarding CONSOL Coal Resources LP (NYSE:CCR).
Hedge fund activity in CONSOL Coal Resources LP (NYSE:CCR)
At Q2's end, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CCR over the last 16 quarters. With hedgies' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Greenlight Capital, managed by David Einhorn, holds the most valuable position in CONSOL Coal Resources LP (NYSE:CCR). Greenlight Capital has a $91.5 million position in the stock, comprising 6.8% of its 13F portfolio. Coming in second is Mountain Lake Investment Management, managed by Mitch Cantor, which holds a $3.6 million position; 1.7% of its 13F portfolio is allocated to the company. Remaining professional money managers that hold long positions encompass Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Emanuel J. Friedman's EJF Capital and .
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Renaissance Technologies. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified CCR as a viable investment and initiated a position in the stock.
Let's check out 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 Old Line Bancshares, Inc. (NASDAQ:OLBK), Collegium Pharmaceutical Inc (NASDAQ:COLL), Castlight Health Inc (NYSE:CSLT), and Intrepid Potash, Inc. (NYSE:IPI). This group of stocks' market values match CCR's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OLBK,5,35365,-4 COLL,16,70836,-4 CSLT,16,27942,4 IPI,16,30362,2 Average,13.25,41126,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $96 million in CCR's case. Collegium Pharmaceutical Inc (NASDAQ:COLL) is the most popular stock in this table. On the other hand Old Line Bancshares, Inc. (NASDAQ:OLBK) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks CONSOL Coal Resources LP (NYSE:CCR) is even less popular than OLBK. 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 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 -16.2% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
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