David Einhorn's Greenlight Capital disclosed an equity portfolio valued at some $7.65 billion as of the end of the first quarter of 2015. The equity portfolio is mainly invested in Technology (48%), Consumer Discretionary (21%) and Industrials (14%) stocks.
In a previous article we analyzed the top three positions held as of the end of March 2015. So now, let�s take a look at his fourth-largest position, Consol Energy Inc. (CNX).
The guru has increased his position in Consol Energy by 55.3% to $574 million in the fund's latest filing. Consol Energy is the fund's fourth-largest holding, with 7.5% of the portfolio, behind Apple Inc. ( AAPL ), Micron Technology, Inc. ( MU ) and SunEdison, Inc. ( SUNE ), representing 12.1%, 11.9% and 7.8%, respectively.
Mason Hawkins (Trades, Portfolio)' Southeastern Asset Management upped its stake by 7.9% to $1.25 billion, holding 44.95 million shares, thus it is the largest shareholder of the company. Steven Richman's East Side Capital (Rr Partners) had the third largest position in Consol Energy after after increasing its position by 16% to $112.8 million. Bill Miller�s Legg Mason Capital Management and Mario Gabelli (Trades, Portfolio)�s Gamco Investors both decreased their stakes in the company by 4% and 2.1%, respectively. Grt Capital Partners' stake is valued at $20.5 million after decreasing by 1% the position. John Orrico�s Water Island Capital upped its position in Consol Energy on a great level and David S. Winter and David J. Millstone�s 40 North Management took the opposite direction. Water Island Capital ramped up its position by 259% to $18 million, and 40 North Management reduced the position by 42% to a value of $14.5 million.
To complete the list of the top 10 positions in the firm, Jacob Doft's Highline Capital Management had a new position in put options of Consol Energy, with a stake of $20.4 million. The same derivative option was used by Gordy Holterman and Derek Dunn�s Overland Advisors, which initiated a put option position of $19.6 million.
I think the bullish positions in Consol Energy are because of the price performance, which is close to 5-year low. Among the reasons we can find to explain this performance, we can mention two important ones. First, revenue has been in decline for the last 5 years.
Year | Dec05 | Dec06 | Dec07 | Dec08 | Dec09 | Dec10 | Dec11 | Dec12 | Dec13 | Dec14 |
Rev. Per Share | 20.54 | 20.01 | 19.36 | 24.29 | 25.28 | 24.12 | 26.71 | 16.05 | 14.34 | 16.09 |
Second, operating margin has also been in decline in a 5-year period. The average rate of decline per year is -3.4%.
Year | Dec-15 | Dec-15 | Dec-15 | Dec-15 | Dec-15 | Dec-15 | Dec-15 | Dec-15 | Dec-15 | Dec-15 |
Op. Margin (%) | 17.9 | 15.5 | 6.51 | 12.47 | 17.06 | 8.94 | 12.88 | 17.04 | 8.04 | 13.47 |
Moreover, the company trades at a trailing P/E of 46.9 and a forward P/E of 57.47, by far more than any benchmark to compare. Although the stock's price over the last five years is probably among the reason why several hedge fund managers felt bullish on the stock, it is also true that the price continues this downward trend.
Anyone can imagine that I do not have David Einhorn (Trades, Portfolio)�s track record, but in this opportunity I will not follow him, and I recommend staying away of this company.
Disclosure: As of this writing, Omar Venerio did not hold a position in any of the aforementioned stocks.
This article first appeared on
GuruFocus.