We recently compiled a list of the David Einhorn’s Stock Portfolio: Top 10 Stocks to Buy. In this article, we are going to take a look at where CONSOL Energy Inc. (NYSE:CEIX) stands against the other the David Einhorn’s Top Stocks Pick.
Will the stock market rally persist heading into the year-end?
Major indices are at record highs, making it hard to predict market direction despite the Federal Reserve’s policy tweaks. Investors have pushed equities higher amid AI excitement and expected rate cuts, but momentum is waning.
Recent market swings are driven by Middle East tensions, with the S&P 500 down 1.1% in October after a 2% rise in September. Geopolitical risks and potential conflicts, like Israel and Iran, add uncertainty, pushing investors towards safe havens like gold and bonds.
READ ALSO: 7 Best Nanotech Penny Stocks to Buy and 7 Dirt Cheap Stocks to Invest In Now.
S&P Global’s Daniel Bergin warns of a dangerous economic period, comparing it to the 1962 Cuban Missile Crisis:
“The betting is that the Israelis would not attack, try to attack, the nuclear facilities at this time. But a few months from now, a few weeks from now, whatever it is, Iran would have the capacity — its thought — to deliver a nuclear weapon, and that raises the stakes.”
The Fed and Chinese authorities are cutting rates to support their economies. Alexander Cousley from Russell Investments notes:
“We haven’t moved into this world where fiscal has become the dominant driver, and so that’s what we’re really looking for… we are still in this period where Chinese authorities respond to weakening data, and the thing starts to improve a little bit, and we don’t see the actual follow through.”
David Einhorn’s Market Concerns and Investment Strategy
Economic growth uncertainty in two of the world’s largest economies should be a point of concern for investors eyeing opportunities in the equity markets. David Einhorn, the legendary investor behind Greenlight Capital, was the first to raise concerns about valuations in the market early in the year.
In a letter to investors, the hedge fund manager reiterated that the stock market was fundamentally broken as investment capital did not care about valuation:
“The result is that a very small portion of trading volume today is based on strategies that try to identify which stocks are undervalued in order to buy them for an intermediate or a long-term investment period, with a view that the shares will outperform as they close the discount to fair value,” states the April ’24 letter.
David Einhorn launched Greenlight Capital at 27 with $900,000 from family and friends. He gained prominence by short-selling Allied Capital in 2002, a move validated by the SEC years later. During the Great Recession, he shorted Lehman Brothers in 2007.
Known for value investing, Einhorn now questions its viability due to market changes and the rise of passive investing. Earlier this year, he expressed concerns that value investing might be obsolete due to a broken market structure and the increasing dominance of passive investing.
This shift in market structure has led Einhorn to change his investing philosophy. Now, he focuses on companies that look cheap in value and return capital to shareholders through repurchases or dividends.
Despite changing his strategy, Einhorn has generated strong long-term returns. Greenlight has averaged annual returns of 13.1% since its launch in 1996, compared to 9.5% for the broader benchmark S&P 500. That equates to a total return of over 2,900% compared to the S&P 500’s 1,117%.
Einhorn’s solid returns over the years have come to haunt, as former Greenlight Capital analyst James Fishback sued Greenlight Capital over claims he was underpaid. In a filing to the American Arbitration Association, Fishback alleges that he was underpaid over the years he worked at the hedge fund and wants the arbitrator to award him $5 million.
Since departing to establish his own company, Fishback has consistently frustrated Einhorn, publicly debating his ex-employer on Twitter regarding his stance on Tesla’s stock and provoking him with comments about his recent achievements.
Nevertheless, Greenlight Capital lost 1.7 per cent in August, a generally volatile but positive month for the broad market. The loss cut its gain for the year to 9.1 per cent. It is not clear which investments drove last month’s loss.
Amid the mixed results, David Einhorn’s stock portfolio could offer some reprieve as it contains some stocks trading at highly discounted levels. According to Einhorn’s Greenlight Capital, undervalued stocks tend to underperform for extended periods to the extent of becoming extremely cheap.
Similarly, such stocks are well-positioned to bounce back and rally when investors note how undervalued they are, especially when other counterparts are trading at premium valuations.
Our Methodology
To compile the list of the David Einhorn Stock Portfolio: Top 10 Stocks to Buy we examined Greenlight Capital’s 13F portfolio, as of Q2 2024. The stocks are ranked in ascending order based on Greenlight Capital’s stakes in them.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
CONSOL Energy Inc. (NYSE:CEIX)
Greenlight Capital’s Equity Stake: $167.41 Million
Number of Hedge Fund Holders: 30
CONSOL Energy Inc. (NYSE:CEIX) is an energy company that produces and sells bituminous coal. Its PAMC segment engages in the mining, preparing, and marketing bituminous coal to power generators, industrial end-users, and metallurgical end-users.
It remains one of the biggest holdings in Einhorn’s portfolio as the company is well-positioned to benefit from Russia’s conflict with Ukraine. As Europe seeks sources of coal instead of depending on Russia’s coal shipments, the company remains one of the biggest beneficiaries. The most recent quarterly earnings reveal the positive effects on CONSOL.
During the second quarter of 2024, it reported a total income of $384 million, with the PAMC division playing a significant role by selling 5.8 million tons. Nonetheless, the second quarter experienced a 36% decrease in revenue due to the decline in export ability due to the FSK Bridge’s collapse. Despite this, there was a 9% decrease in sales compared to the previous year, but careful strategic adjustments in the distribution of export orders helped lessen the effects of this decline.
CONSOL Energy Inc. (NYSE:CEIX) reported a profit of $58 million and an adjusted EBITDA of $125 million for the period. Additionally, it produced $59 million in free cash flow and sold around 5.8 million tons of its Pennsylvania Mining Complex (PMC) products, with 2.9 million tons going to the export market.
CONSOL Energy Inc. (NYSE:CEIX) expanded its average coal revenue range per ton and adjusted its expectations for PMC sales in 2024. The company has also found alternative port facilities and controlled its production expenses, leading to strong cash margins per ton.
Considering these recent achievements, CONSOL Energy Inc. (NYSE:CEIX) prioritizes safety, cost management, and securing long-term agreements. The firm is hopeful about future industrial needs and is committed to delivering value to its investors.
It has also grown its book of business, finalizing fixed-price multi-year agreements. Despite facing some obstacles, such as the temporary disruption caused by the Port of Baltimore closure, CONSOL Energy’s book of business is still strong, with 14.5 million tons of contracts secured for 2025.
As of Q2 2024, 30 hedge funds, holding a combined investment of $348.15 million, are bullish on CONSOL Energy Inc. (NYSE:CEIX), according to Insider Monkey’s database.
Greenlight Capital stated the following regarding CONSOL Energy Inc. (NYSE:CEIX) in its Q2 2024 investor letter:
“In addition to gold, we had four material winners in our long portfolio this quarter. CONSOL Energy Inc. (NYSE:CEIX) recovered from $83.76 to $102.03. In the first quarter, CEIX was hindered by the Baltimore bridge collapse, which blocked the company’s exports for a few months. The harbor has now reopened and the market appears to have largely moved past the issue.”
Overall CEIX ranks 2nd on our list of David Einhorn Stock Portfolio: Top 10 Stocks to Buy. While we acknowledge the potential of CEIX as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CEIX, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.