David Einhorn (Trades, Portfolio) last week made a large reduction to his stake in Consol Energy (CNX, Financial) after it inched up this year from its 2015 crash that cut into his returns.
Einhorn, the president of hedge fund Greenlight Capital, sold 7 million shares of Consol on June 1, docking his position by 23.8%. After the sells, he holds 22.4 million shares, or 9.8% of the company, worth $347.8 million.
Einhorn’s sell of Consol, an Appalachian coal and natural gas company, came as its shares gained 97.9% for the year through Friday, recovering some of their 77.5% dive in 2015. Consol was one of the 10 worst-performing stocks of the S&P 500 last year. Along with several other losing stocks, Consol, his sixth largest position in a concentrated portfolio, contributed to Einhorn’s 20.2% loss for 2015.
Consol closed Monday down 1.47% to $15.43 per share.
The per-share sell price for Einhorn’s funds, $15.01, represents roughly half of his average buy price of $30. Einhorn started buying Consol in the third quarter 2014 when the price averaged $40 and amassed more shares as it continued to come down over four subsequent quarters.
Commenting on Consol’s troublesome year in his third quarter letter, Einhorn also said that the company’s financials “do not lend themselves to easy analysis.”
“Right now, CONSOL Energy is transitioning from one of the country’s biggest coal producers into a natural gas company,” he said. “CONSOL Energy’s financial statements combine both operations, which makes it challenging to properly analyze either of them.”
Both Einhorn and another major shareholder, Southeastern Asset Management, applauded Consol’s cost management and capital discipline in the face of falling commodity prices, according to their recent shareholder letters. Both also anticipated its planned return to generating free cash flow in 2016.
In its first quarter financial results, Consol confirmed that it continued to focus on the free cash flow plan, and reported generating $449 million in free cash flow for the quarter primarily due to lowering unit costs, improving capital efficiency and selling assets.
Southeastern Asset Management has advocated for asset sales in their discussions with management. The firm, led by guru Mason Hawkins (Trades, Portfolio), added three members to Consol’s and replaced its chairman in the first quarter, helping to effect the sale of $420 million in coal assets.
Einhorn reduces his interest in Consol as he deals with the aftermath of the worst year in his firm’s history. On April 15, he also slashed 75% of his active investment in SunEdison (SUNE, Financial), a solar energy company that filed for Chapter 11 bankruptcy, as its stock plunged to 32 cents per share.
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