In this article we will check out the progression of hedge fund sentiment towards Centrais Eletricas Brasileiras SA (NYSE:EBR) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is Centrais Eletricas Brasileiras SA (NYSE:EBR) a splendid stock to buy now? The best stock pickers were turning less bullish. The number of long hedge fund positions retreated by 1 in recent months. Centrais Eletricas Brasileiras SA (NYSE:EBR) was in 5 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 8. Our calculations also showed that EBR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Dmitry Balyasny of Balyasny Asset Management
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 glance at the key hedge fund action surrounding Centrais Eletricas Brasileiras SA (NYSE:EBR).
Do Hedge Funds Think EBR Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards EBR over the last 23 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Cliff Asness’s AQR Capital Management has the most valuable position in Centrais Eletricas Brasileiras SA (NYSE:EBR.B), worth close to $0.5 million, accounting for less than 0.1%% of its total 13F portfolio. Coming in second is Ryan Tolkin (CIO) of Schonfeld Strategic Advisors, with a $0.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers with similar optimism comprise Michael Gelband’s ExodusPoint Capital, Dmitry Balyasny’s Balyasny Asset Management and Donald Sussman’s Paloma Partners. In terms of the portfolio weights assigned to each position Schonfeld Strategic Advisors allocated the biggest weight to Centrais Eletricas Brasileiras SA (NYSE:EBR.B), around 0.0034% of its 13F portfolio. ExodusPoint Capital is also relatively very bullish on the stock, setting aside 0.0028 percent of its 13F equity portfolio to EBR.
Seeing as Centrais Eletricas Brasileiras SA (NYSE:EBR.B) has witnessed bearish sentiment from the smart money, logic holds that there was a specific group of hedgies who sold off their positions entirely heading into Q2. Intriguingly, Israel Englander’s Millennium Management cut the biggest position of the 750 funds followed by Insider Monkey, comprising about $2.6 million in stock. Ken Griffin’s fund, Citadel Investment Group, also dumped its stock, about $0.3 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 1 funds heading into Q2.
Let’s go over hedge fund activity in other stocks similar to Centrais Eletricas Brasileiras SA (NYSE:EBR.B). These stocks are Levi Strauss & Co. (NYSE:LEVI), Melco Resorts & Entertainment Limited (NASDAQ:MLCO), Upstart Holdings, Inc. (NASDAQ:UPST), Lamar Advertising Company (NASDAQ:LAMR), AECOM (NYSE:ACM), Continental Resources, Inc. (NYSE:CLR), and NiSource Inc. (NYSE:NI). All of these stocks’ market caps are similar to EBR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LEVI | 19 | 253280 | -2 |
| MLCO | 29 | 728338 | -1 |
| UPST | 13 | 1798914 | -2 |
| LAMR | 35 | 427242 | -1 |
| ACM | 38 | 1005485 | 1 |
| CLR | 23 | 154016 | -6 |
| NI | 28 | 268051 | 5 |
| Average | 26.4 | 662189 | -0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.4 hedge funds with bullish positions and the average amount invested in these stocks was $662 million. That figure was $1 million in EBR’s case. AECOM (NYSE:ACM) is the most popular stock in this table. On the other hand Upstart Holdings, Inc. (NASDAQ:UPST) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Centrais Eletricas Brasileiras SA (NYSE:EBR.B) is even less popular than UPST. Our overall hedge fund sentiment score for EBR is 22.8. 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 clearly dropped the ball on EBR as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 5 most popular stocks among hedge funds 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 and still beat the market by 6.1 percentage points. A small number of hedge funds were also right about betting on EBR as the stock returned 51% since Q1 (through June 18th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
