Should I Avoid Companhia Paranaense de Energia – COPEL (ELP)?
Is Companhia Paranaense de Energia - COPEL (NYSE:ELP) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Companhia Paranaense de Energia - COPEL (NYSE:ELP) investors should pay attention to a decrease in activity from the world's largest hedge funds recently. Companhia Paranaense de Energia - COPEL (NYSE:ELP) was in 5 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 12. Our calculations also showed that ELP isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
David Siegel of Two Sigma Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we're going to take a look at the fresh hedge fund action regarding Companhia Paranaense de Energia - COPEL (NYSE:ELP).
Do Hedge Funds Think ELP Is A Good Stock To Buy Now?
At first quarter's end, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -44% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ELP over the last 23 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Companhia Paranaense de Energia - COPEL (NYSE:ELP) was held by Millennium Management, which reported holding $30.5 million worth of stock at the end of December. It was followed by AQR Capital Management with a $4.7 million position. Other investors bullish on the company included Two Sigma Advisors, Arrowstreet Capital, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Millennium Management allocated the biggest weight to Companhia Paranaense de Energia - COPEL (NYSE:ELP), around 0.02% of its 13F portfolio. AQR Capital Management is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to ELP.
Judging by the fact that Companhia Paranaense de Energia - COPEL (NYSE:ELP) has witnessed a decline in interest from the entirety of the hedge funds we track, logic holds that there exists a select few funds that elected to cut their full holdings in the first quarter. It's worth mentioning that Paul Marshall and Ian Wace's Marshall Wace LLP said goodbye to the largest stake of the 750 funds followed by Insider Monkey, valued at close to $0.4 million in stock. Ryan Tolkin (CIO)'s fund, Schonfeld Strategic Advisors, also dropped its stock, about $0.3 million worth. These transactions are important to note, as total hedge fund interest fell by 4 funds in the first quarter.
Let's now review hedge fund activity in other stocks similar to Companhia Paranaense de Energia - COPEL (NYSE:ELP). We will take a look at ArcelorMittal (NYSE:MT), Palo Alto Networks Inc (NYSE:PANW), V.F. Corporation (NYSE:VFC), NatWest Group plc (NYSE:NWG), McKesson Corporation (NYSE:MCK), AutoZone, Inc. (NYSE:AZO), and The Trade Desk, Inc. (NASDAQ:TTD). All of these stocks' market caps are closest to ELP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MT,21,709788,3 PANW,64,4015196,3 VFC,31,1109135,0 NWG,6,4359,3 MCK,51,2123043,0 AZO,34,754312,-10 TTD,35,812891,0 Average,34.6,1361246,-0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.6 hedge funds with bullish positions and the average amount invested in these stocks was $1361 million. That figure was $36 million in ELP's case. Palo Alto Networks Inc (NYSE:PANW) is the most popular stock in this table. On the other hand NatWest Group plc (NYSE:NWG) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Companhia Paranaense de Energia - COPEL (NYSE:ELP) is even less popular than NWG. Our overall hedge fund sentiment score for ELP is 13.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds dodged a bullet by taking a bearish stance towards ELP. Our calculations showed that the top 10 most popular hedge fund stocks returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th but managed to beat the market again by 6.1 percentage points. Unfortunately ELP wasn't nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); ELP investors were disappointed as the stock returned 3.1% since the end of the first quarter (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
Get real-time email alerts: Follow Companhia Paranaense De Energia (NYSE:ELP)
Disclosure: None. This article was originally published at Insider Monkey.
Related Content
