These Energy Stocks May Be Down But Hedge Funds Don’t Think They’re Out

Like Sunedison, Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) is down because crude is down. Petrobras depends on crude for the majority of its revenue and needs higher crude prices to service its $90 billion in dollar denominated debt, which could become a big problem if Brazil’s currency continues to depreciate. Shares of the company are down by 44% year-to-date and are close to their 52-week low. Although Petrobras cut its five-year capital expenditure budget by 40%, the market is not satisfied and is looking for more cuts.

Hedge funds are still optimistic on Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR). The total number of hedge funds long Petrobras declined to 31 from 35 but the aggregate value of their holdings increased to $760 million at the end of June from $737 million at the end of March. Doug Silverman and Alexander Klabin‘s Senator Investment Group pared its position by 3% to 20.0 million shares while David Halpert’s Prince Street Capital Management established a new position of 1.97 million shares.

Given that crude prices can’t stay low indefinitely, we’re bullish on the two stocks despite their declines. The short run may still be a little painful, but the long run could make for quite a comeback story.

Disclosure: None