On the Performance of Brazilian Utility Stocks

The Brazil presidential election run-off is on Oct 26th (Sunday).The current President Dilma Rousseff is challenged by Aécio Neves. Investors are eagerly waiting for the outcome of this election as there will be major policy changes that impact the investment climate in the country.They are betting for a Aécio Neves win as Dilma has been a disaster during her tenure from an investors’ point of view. Brazil used to be a hot destination for investors when President Lulu was in office and the equity markets soared.

In the past few years Brazilian stocks in general have been poor performers compared to other emerging markets. Among the Brazilian ADRs trading on the US markets, utilities have not fared well either.

The table below shows the 5-year and year-to-date price return of Brazilian utility stocks trading on the NYSE:

S.No.CompanyTickerStock price as of Oct 22, 2014 CloseYear-to-date change(%) as of Oct 22, 20145-Year Price Return (%)
1Companhia Energetica de Minas Gerais(CEMIG)CIG$6.092.34%-28.42%
2Comp. Paranaense de Energia(COPEL)ELP$13.000.23%-25.17%
3Centrais Eletricas Brasileiras-EletrobrasEBR$2.56-5.02%-82.85%
4CPFL EnergiaCPL$14.79-7.81%-15.30%

Source: BNY Mellon, Yahoo Finance

All four stocks noted above yielded negative returns in the past five years. Eletrobras was the worst performer with an incredible loss of about 83%.

The losses of these utility stocks underscores the risk involved in investing in utilities of emerging markets even for the long-term.

Disclosure: No Positions

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