Greenlight Capital leader David Einhorn (Trades, Portfolio) disclosed earlier this week he upped his stake in CNX Resources Corp. (CNX, Financial) by 18.96%.
The well-known activist investor's New York-based firm seeks long-term capital appreciation by taking an approach rooted in emphasizing intrinsic value, investing in companies that have the potential to achieve consistent returns and safeguard capital regardless of market conditions. Einhorn is also known for his short positions, which include Tesla Inc. (TSLA, Financial) and Netflix Inc. (NFLX, Financial).
According to GuruFocus Real-Time Picks, a Premium feature, Einhorn picked up 1.2 million shares of the Pittsburgh-based company on Dec. 30, impacting the equity portfolio by 1.06%. The stock traded for an average price of $10.97 per share on the day of the transaction.
He now holds slightly over 4 million shares, which represent 3.55% of the equity portfolio. GuruFocus estimates Einhorn has lost 35.69% on the investment since establishing it in the third quarter of 2014.
Operating in the Appalachian Basin, the natural gas producer has a $2.98 billion market cap; its shares were trading around $13.17 on Tuesday with a price-book ratio of 0.7 and a price-sales ratio of 2.24.
The GF Value Line suggests the stock is currently significantly overvalued based on its past performance, future projections and historical multiples.
On Oct. 29, CNX reported its third-quarter results, posting adjusted earnings of 4 cents per share on $66.1 million in revenue. In a statement, President and CEO Nicholas J. DeIuliis noted the company is continuing to "successfully execute its plan" as it recorded significant positive free cash flow growth, reduced absolute debt and lowered fully burdened cash costs.
"We continue to expect to generate total free cash flow of approximately $3.4 billion across our 2020-2026 long-term plan, and our focus remains on making capital allocation decisions to maximize the long-term intrinsic value per share of the company," he added.
The company will announce its fourth-quarter and full-year 2020 financial results before the opening bell on Jan. 28.
GuruFocus rated CNX Resources' financial strength 3 out of 10. As a result of issuing approximately $240.4 million in new long-term debt over the past three years, the company has weak interest coverage. The low Altman Z-Score of 0.38 also warns CNX could be in danger of going bankrupt if it does not improve its liquidity position.
The company's profitability fared a bit better, scoring a 5 out of 10 rating. Despite having negative margins and returns that underperform over half of its competitors, CNX Resources is supported by a moderate Piotroski F-Score of 4, which indicates business conditions are stable. As a result of recording losses in operating income and revenue per share over the past several years, however, its predictability rank of one out of five stars is on watch. GuruFocus data shows companies with this rank return an average of 1.1% annually over a 10-year period.
Of the gurus invested in CNX Resources, Mason Hawkins (Trades, Portfolio)' Southeastern Asset Management has the largest stake with 15.85% of outstanding shares. Steven Cohen (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and John Hussman (Trades, Portfolio) also have positions in the stock.
Portfolio composition and performance
Einhorn's $1.23 billion equity portfolio, which was composed of 36 stocks as of the end of the third quarter, is most heavily invested in the consumer cyclical sector with a weight of 36.44%. The industrials space has a much smaller representation at 16.80%.
Other energy stocks he held as of Sept. 30 were CONSOL Goal Resources LP (CCR, Financial) and Gulfport Energy Corp. (GPORQ, Financial).
In 2019, Greenlight significantly underperformed the S&P 500 with a return of 9.3%. The index posted a 31.48% return. While performance data for 2020 has not yet been released, Bloomberg reported in November the firm was down 1.1% for the year after recording five consecutive months of gains.
Disclosure: No positions.
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