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Hedge Fund Sentiment Is Stagnant On CNX Resources Corporation (CNX)

Asma UL Husna

The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don't follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That's why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at CNX Resources Corporation (NYSE:CNX) from the perspective of those elite funds.

CNX Resources Corporation (NYSE:CNX) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 21 hedge funds' portfolios at the end of the second quarter of 2019. At the end of this article we will also compare CNX to other stocks including Rush Enterprises, Inc. (NASDAQ:RUSHA), Rambus Inc. (NASDAQ:RMBS), and Vector Group Ltd (NYSE:VGR) to get a better sense of its popularity. Our calculations also showed that CNX 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.

5 Most Popular Stocks Among Hedge Funds

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 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 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.

CNX_oct2019

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. We're going to check out the latest hedge fund action regarding CNX Resources Corporation (NYSE:CNX).

Hedge fund activity in CNX Resources Corporation (NYSE:CNX)

At the end of the second quarter, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards CNX over the last 16 quarters. With the smart money's sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

01 Mason Hawkins, Southeastern Asset Management

Among these funds, Southeastern Asset Management held the most valuable stake in CNX Resources Corporation (NYSE:CNX), which was worth $404.8 million at the end of the second quarter. On the second spot was Greenlight Capital which amassed $43 million worth of shares. Moreover, AQR Capital Management, Bridgewater Associates, and Citadel Investment Group were also bullish on CNX Resources Corporation (NYSE:CNX), allocating a large percentage of their portfolios to this stock.

Because CNX Resources Corporation (NYSE:CNX) has experienced declining sentiment from the aggregate hedge fund industry, logic holds that there is a sect of hedge funds that decided to sell off their full holdings last quarter. Intriguingly, John Overdeck and David Siegel's Two Sigma Advisors sold off the biggest position of the "upper crust" of funds tracked by Insider Monkey, valued at close to $3.6 million in stock, and Paul Marshall and Ian Wace's Marshall Wace LLP was right behind this move, as the fund said goodbye to about $3.2 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

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 Rush Enterprises, Inc. (NASDAQ:RUSHA), Rambus Inc. (NASDAQ:RMBS), Vector Group Ltd (NYSE:VGR), and Hercules Capital, Inc. (NYSE:HTGC). This group of stocks' market values are closest to CNX's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RUSHA,20,89775,1 RMBS,16,147460,-1 VGR,18,134559,-4 HTGC,12,25334,2 Average,16.5,99282,-0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $99 million. That figure was $501 million in CNX's case. Rush Enterprises, Inc. (NASDAQ:RUSHA) is the most popular stock in this table. On the other hand Hercules Capital, Inc. (NYSE:HTGC) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks CNX Resources Corporation (NYSE:CNX) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately CNX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on CNX were disappointed as the stock returned -0.7% 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 in Q3.

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

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