We recently compiled a list of the 10 Best Stocks to Buy According to Billionaire David Einhorn. In this article, we are going to take a look at where CONSOL Energy Inc. (NYSE:CEIX) stands against the other best stocks to buy according to Billionaire David Einhorn.
The markets are broken and getting worse. That’s the stance held by billionaire investor David Einhorn, who insists we are in a secular destruction of the professional asset management community. The sentiments come against one of the longest bull runs that have resulted in valuations in the equity markets getting out of hand.
While the S&P 500 is at record highs after a 30% plus gain year to date, Einhorn views the markets as fundamentally broken. Passive investors with no opinion or concern about value have been the main drivers pushing the market higher while shunning underlying fundamentals. According to Einhorn, passive investors increasingly buy into market indexes by default, propping growth stocks at the expense of value stocks.
READ ALSO: Billionaire Daniel Sundheim’s Top 15 Stock Picks Heading Into 2025 and Billionaire David Tepper’s Top 10 Stock Picks Heading into 2025.
Likewise, the billionaire hedge fund manager laments that value investors are increasingly marginalized.
“And so effectively instead of the valuation becoming the signal, the valuation people were just noise and everybody else is sort of the signal. And this is why I think we have a structurally dysfunctional market, a bit of a broken market, and essentially a perpetual erosion of value as a strategy, as you would,” Einhorn said in an interview with CNBC.
The sentiments underline the growing concerns that value stocks are becoming increasingly cheaper and cheaper relative to their underlying fundamentals. That’s in part because investors are turning their attention to indexes and growth stocks, resulting in overstretched valuations. Increased focus on growth stocks at the expense of value stocks has resulted in one of the most expensive stock markets in decades.
Amid the premium valuations, David Einhorn insists there is still some value to unlock by focusing on value stocks trading at discounted valuations. By focusing on value investments, Einhorn has generated strong long-term returns through Greenlight Capital, the hedge fund he founded in 1996 with $900,000 from family and friends.
Likewise, Greenlight Capital rose to prominence at the height of the financial crisis, as Einhorn sensed a window of opportunity to generate some returns by shorting the stock of Lehman brothers. Similarly, it was on the news in 2002 as it shorted Allied Capital, a transaction that was validated in 2002 by the US Securities and Exchange Commission.
Since 1996, Greenlight Capital has averaged 13.1% in annual returns compared to 9.5% gains for the S&P 500. The outperformance comes from Einhorn emphasizing the balancing of long- and short-term exposure in investments. Likewise, he advocates monitoring industry risks and obtaining insurance against foreseeable macro threats.
Additionally, stock picking has always been essential as one of Einhorn’s key investment strategies of integrating considerable picture awareness into successful portfolio management strategies. Diversification as one of the ways of spreading risks is also Einhorn’s key investment strategies.
“Having my eyes open to the big picture doesn’t mean abandoning stock picking, but it does mean managing the long-short exposure ratio more actively, worrying about what may be brewing in certain industries, and, when appropriate, buying some just-in-case insurance for foreseeable macro risks even if they are hard to time,” Einhorn said.
Our Methodology
To make the list of the best stocks to buy according to billionaire David Einhorn, we scanned Greenlight Capital’s investment portfolio. We then settled on the hedge fund’s largest holdings analyzing why they stand out and the number of hedge funds that hold stakes in them. Finally, we ranked the stocks in ascending order based on Greenlight Capital’s stake value.
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 Stake Value: $171.70 Million
Number of Hedge Fund Holders: 31
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 of bituminous coal to power generators, industrial end-users, and metallurgical end-users. The stock is up by 11% for the year as investors react to robust financial results and strategic initiatives that affirm long-term prospects.
CONSOL Energy Inc. (NYSE:CEIX) delivered robust third-quarter results on November 5, 2024. Net income rose to $96 million with adjusted EBITDA of $179 million. The better-than-expected results came as coal production in the quarter totaled 7.2 million tons amid shutdowns in the quarter for maintenance. CEIX has already moved to strengthen its long-term prospects by acquiring Arch Resources. The acquisition should enhance its coal reserves.
In addition, CONSOL Energy Inc. (NYSE:CEIX) is targeting operational efficiency cost reductions and sales expansion to bolster its profit margins. The push should align with the company’s push to service the 18 million tons of coal already contracted. Its long-term outlook also remains solid amid reduced forecasts for coal plant retirements. The fossil fuel industry is once again a buzz of activities in the aftermath of Donald Trump winning the hotly contested election. The president-elect has always been a fossil fuel advocate in a bid to safeguard and enhance Americans’ energy needs.
Black Bear Value Partners stated the following regarding CONSOL Energy Inc. (NYSE:CEIX) in its Q3 2024 investor letter:
“ARCH and Warrior are 2 of the leading U.S. producers of high-quality metallurgical coal (“met coal”). This is the kind of coal used for steelmaking. ARCH also has a small thermal coal business that contributes ~20% of their earnings. CONSOL Energy Inc. (NYSE:CEIX) is a leading producer of thermal coal. During the 3rd quarter ARCH and CONSOL announced a merger which should close in the first half of 2025. I am generally constructive on the merger as the Companies should be able to realize some modest synergies. My sense is more mergers will be coming to this sector given the depressed prices of the securities.
Met coal demand is projected to climb for the next 25 years, driven by the economic development and urbanization in India and the rest of Southeast Asia. ~60% of the world’s population lives in Asia, where met coal demand is centered and where local sources are limited. Over the coming years demand will likely outstrip supply, leading to higher prices. There has been a severe lack of investment in met coal due to ESG concerns with investment peaking in 2014.”
Overall, CEIX ranks 2nd on our list of best stocks to buy according to Billionaire David Einhorn. While we acknowledge the potential of CEIX to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CEIX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.