Companhia Paranaense de Energia – COPEL (ELP): Hedge Funds Watching Cautiously

In this article we will take a look at whether hedge funds think Companhia Paranaense de Energia – COPEL (NYSE:ELP) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Hedge fund interest in Companhia Paranaense de Energia – COPEL (NYSE:ELP) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare ELP to other stocks including Envestnet Inc (NYSE:ENV), Vertiv Holdings Co (NYSE:VRT), and Continental Resources, Inc. (NYSE:CLR) to get a better sense of its popularity.

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In the eyes of most shareholders, hedge funds are perceived as unimportant, old financial vehicles of yesteryear. While there are over 8000 funds in operation at the moment, Our experts look at the upper echelon of this club, around 850 funds. Most estimates calculate that this group of people oversee most of all hedge funds’ total asset base, and by tailing their unrivaled investments, Insider Monkey has found various investment strategies that have historically outrun Mr. Market. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a gander at the fresh hedge fund action encompassing Companhia Paranaense de Energia – COPEL (NYSE:ELP).

How are hedge funds trading Companhia Paranaense de Energia – COPEL (NYSE:ELP)?

At the end of the first quarter, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 10 hedge funds held shares or bullish call options in ELP a year ago. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Companhia Paranaense de Energia – COPEL (NYSE:ELP), which was worth $21.5 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $15.3 million worth of shares. D E Shaw, Two Sigma Advisors, and AQR Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Arrowstreet Capital allocated the biggest weight to Companhia Paranaense de Energia – COPEL (NYSE:ELP), around 0.04% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.02 percent of its 13F equity portfolio to ELP.

Because Companhia Paranaense de Energia – COPEL (NYSE:ELP) has experienced falling interest from hedge fund managers, we can see that there exists a select few money managers who were dropping their positions entirely by the end of the first quarter. At the top of the heap, Mike Vranos’s Ellington said goodbye to the largest stake of all the hedgies monitored by Insider Monkey, totaling close to $0.4 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund cut about $0.1 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Companhia Paranaense de Energia – COPEL (NYSE:ELP) but similarly valued. We will take a look at Envestnet Inc (NYSE:ENV), Vertiv Holdings Co (NYSE:VRT), Continental Resources, Inc. (NYSE:CLR), and Stantec Inc. (NYSE:STN). This group of stocks’ market valuations are closest to ELP’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ENV 17 74887 -1
VRT 39 540556 4
CLR 26 66933 -12
STN 12 52596 3
Average 23.5 183743 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $184 million. That figure was $45 million in ELP’s case. Vertiv Holdings Co (NYSE:VRT) is the most popular stock in this table. On the other hand Stantec Inc. (NYSE:STN) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Companhia Paranaense de Energia – COPEL (NYSE:ELP) is even less popular than STN. Hedge funds clearly dropped the ball on ELP as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on ELP as the stock returned 28% so far in the second quarter and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.