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Investors double down on a losing energy bet

Cheniere Energy keeps losing value, as big hedge fund investors continue building out their positions.

Cheniere Energy, the Louisiana-based natural gas exporter-to-be, is off to a lousy start in 2016. And it's taking a bunch of big names — including Carl Icahn — down with it.

After 2015, when the stock lost roughly half its value, one would think some investors would quit trying to catch a falling knife. But it doesn't look like some of Cheniere's biggest backers last year are willing to cut their losses quite yet.

The two biggest hedge funds in Cheniere increased their position in the stock in late 2015. To begin this year, shares have pared another 20 percent of their value. Since he initiated his position in mid-2015, Icahn is likely to have incurred roughly $200 million in paper losses on his expanding investment.

"It's one of the most popular stocks with hedge funds in the energy sector," said Raymond James equity research analyst Pavel Molchanov. "It definitely polarizes the investment community."

Baupost Group, which rarely reports a losing year, had a loss in 2015 largely due to its energy investments. But it's not keeping Baupost founder Seth Klarman from investing in Cheniere; in fact, he doubled down after losing on the natural gas company in 2015.

"Last year, we were challenged when short sellers publicly targeted two of our larger stock holdings," of which one was Cheniere, Klarman wrote in his letter to investors dated Jan. 20. "In both cases, we carefully considered the short sellers' arguments, re-underwrote and even expanded our analysis, and followed our customary intellectually honest process. In both cases, the additional work confirmed our original thesis."

On Jan. 8, investors knew that Klarman was putting his money where his mouth (and, investor letter) is: He increased his position in Cheniere, eclipsing Icahn as the company's biggest stakeholder with a 15 percent position.

Through a representative, Klarman declined to comment and Icahn did not respond to multiple requests for comment. Cheniere did not respond to a request for comment.

There are other hedge funds that lost on the stock in 2015 that remain optimistic for Cheniere this year, however. Cheniere lost approximately 50 percent of its own value in 2015. The individual funds, mostly lost on the whole year, and all had a loss on the Cheniere trade.

"While the outlook for future LNG prices has deteriorated materially, we believe Cheniere's stock price has upside," wrote Viking Global founder O. Andreas Halvorsen to his fund's investors on Jan. 14.

Though funds that got battered on the Cheniere trade in 2015 are trying to put on a brave face in light of its plummeting share price, there remain big detractors.

On Dec. 17, Kynikos Associates' founder and president, Jim Chanos, spoke with CNBC and called Cheniere's stock "pretty pricey," despite the shares' value having plummeted during the year. The investor said his short position in Cheniere is based on increased capacity in the liquefied natural gas business in the face of demand that isn't rising as some market prognosticators expected. Chanos declined to comment when contacted by CNBC.com for this story.

To play Cheniere isn't to just catch a falling knife; it's a little bit closer to knife juggling. After shares fell throughout 2015, the stock was again hammered after co-founder, president and CEO Charif Souki announced his departure in December 2015, which coincided with his dumping the company's stock. In midday trading Monday, the shares were down about 3 percent.

But investors have cause for optimism. Cheniere is expected to begin exporting liquid natural gas this year, for the first time. Still, this comes as global prices for the commodity have been on the decline for two years. And Cheniere is still in the midst of replacing the CEO and founder. The company will report earnings Feb.19.

"2016 is important for Cheniere," Molchanov said.

Increasingly, the same can be said for investors throwing their weight — and cash — behind the stock.