Hedge fund manager David Einhorn, the founder of Greenlight Capital, talked up his big investment in Consol Energy at a private investment conference.
Einhorn shared Consol Energy as his “best idea” at the annual Robin Hood Investors Conference in New York. The event is closed to the media.
The stock was last up more than 8.7% in the premarket.
Consol Energy is an Appalachia-based coal and natural gas production company.
Consol Energy is one of Greenlight’s largest positions. The fund last held around 22.8 million shares.
Einhorn first purchased the stock in the third quarter of 2014. The stock price was $US37.58 at the end of that quarter. The stock is now trading around $US7.40.
Stock price collapse
The company’s share price has collapsed more than 78% this year alone.
However, in his fund’s third quarter letter, dated October 21, Einhorn noted that the company had “plenty of overlooked good news.”
“The company went through a significant cost-cutting effort and cut its capital spending budget aggressively. In July it reported fantastic drilling results and a significant success at a test well in the Utica Shale. Ordinarily, the market responds favourably to positive drilling news. In the current environment, it has responded more like a child receiving socks as a birthday present, ‘Gee, just what I always wanted … more, cheap natural gas.’
“We believe the market has undue concern about the near-term prospects for Appalachian coal and natural gas, leading it to discount the company’s long-term resource value far beyond anything we anticipated,” the letter said.
Greenlight Capital is currently on track for its second-losing year ever. Greenlight was down 16.29% through the end of October, according to data from HSBC. Einhorn’s only previous down year was in 2008, when his fund lost 23%.
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