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Should You Avoid Companhia Paranaense de Energia (ADR) (ELP)?

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Is Companhia Paranaense de Energia (ADR) (NYSE:ELP) going to take off soon? Investors who are in the know are taking a pessimistic view. The number of bullish hedge fund bets stayed the same which is a slightly negative development in our experience

Companhia Paranaense de Energia (ADR) (NYSE:ELP)

To most shareholders, hedge funds are seen as unimportant, outdated investment tools of yesteryear. While there are over 8000 funds with their doors open at present, we look at the crème de la crème of this club, around 450 funds. It is widely believed that this group oversees the lion’s share of the hedge fund industry’s total asset base, and by monitoring their highest performing picks, we have revealed a few investment strategies that have historically beaten Mr. Market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Equally as important, positive insider trading sentiment is another way to break down the financial markets. There are many incentives for a bullish insider to downsize shares of his or her company, but just one, very clear reason why they would buy. Plenty of empirical studies have demonstrated the market-beating potential of this tactic if shareholders know where to look (learn more here).

With all of this in mind, it’s important to take a look at the latest action regarding Companhia Paranaense de Energia (ADR) (NYSE:ELP).

Hedge fund activity in Companhia Paranaense de Energia (ADR) (NYSE:ELP)

Heading into Q2, a total of 6 of the hedge funds we track held long positions in this stock, a change of 0% from the previous quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes meaningfully.

When looking at the hedgies we track, Renaissance Technologies, managed by Jim Simons, holds the most valuable position in Companhia Paranaense de Energia (ADR) (NYSE:ELP). Renaissance Technologies has a $6.9 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is AQR Capital Management, managed by Cliff Asness, which held a $1.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds that hold long positions include Ken Griffin’s Citadel Investment Group, Mike Vranos’s Ellington and Steven Cohen’s SAC Capital Advisors.

Judging by the fact that Companhia Paranaense de Energia (ADR) (NYSE:ELP) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there is a sect of hedgies that slashed their positions entirely at the end of the first quarter. It’s worth mentioning that John Overdeck and David Siegel’s Two Sigma Advisors sold off the biggest stake of the “upper crust” of funds we watch, totaling about $0.5 million in stock. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

How are insiders trading Companhia Paranaense de Energia (ADR) (NYSE:ELP)?

Bullish insider trading is best served when the primary stock in question has experienced transactions within the past 180 days. Over the latest half-year time period, Companhia Paranaense de Energia (ADR) (NYSE:ELP) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Companhia Paranaense de Energia (ADR) (NYSE:ELP). These stocks are Great Plains Energy Incorporated (NYSE:GXP), Pepco Holdings, Inc. (NYSE:POM), ITC Holdings Corp. (NYSE:ITC), TECO Energy, Inc. (NYSE:TE), and Centrais Eletricas Brasileiras SA (ADR) (NYSE:EBR). This group of stocks are in the electric utilities industry and their market caps are closest to ELP’s market cap.

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