Cia Energetica de Minas Gerais CEMIG-ADR (NYSE:CIG) is one of Brazil’s brightest stars on the OTC. Brazilian electricity giant Cia Energetica de Minas Gerais CEMIG-ADR (NYSE:CIG) has been on a tear of late. The company’s shares were trading near the $2 level at the end of December, but have exploded out of the gate in 2017, now trading at $3.55. On a YTD basis, shares of the company are up 57.02%. The big question, of course, is what is leading to the big spike in CIG activity? We will dig in.
At a current trading level of $3.55, Cia Energetica de Minas Gerais has a total market cap of $3B. Institutional owners account for 16% of the stock ownership of the company. Shares of CIG have recently traded in a range of $3.48-$3.76. Over the most recent 52-week period, shares of CIG have traded as low as $1.40 and as high as $3.76. Over a three-month period, shares of the company are up 47.93%.
Cia Energetica de Minas Gerais CEMIG-ADR (NYSE:CIG) is a holding company engaged in the generation, transmission and distribution of electricity, and operates in five core segments: generation, transmission, distribution, telecom and gas. As part of the company’s electric power transmission business, it is engaged in transporting power from facilities where it is generated to points of consumption, distribution networks and free consumers.
The big question, as noted above, is what is leading to the big spike in CIG activity? After all, Cia Energetica de Minas Gerais (known as CEMIG) is essentially just a play on the Brazilian electrical sector. It produces steady returns in a non-glamorous business. But that may be the secret to understanding why U.S. investors are so eager to pile into shares of CIG – they view it as a pure play on the Brazilian economy.
After all, Cia Energetica de Minas Gerais is the largest integrated Brazilian power company. It’s the largest in Brazil in terms of electric power distribution, the third largest in terms of electric power generation and the third largest in electric power transmission. In fact, the company is responsible for slightly more than 12% of the national distribution.
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Moreover, the company appears to be exceptionally well run, with a history of successful acquisitions and investments in new power projects. The company has a robust, growing EBITDA and has shown a continuous growth in net profit. Moreover, the company has been very effectively looking at ways to pare down non-core assets.
There’s another bonus as well: CIG is viewed as a regional leader in clean energy. It has been part of the Dow Jones Sustainability Index for 17 consecutive years, making it the only company in the power sector in Brazil or Latin America to accomplish that feat. Moreover, as can be seen from the company’s archive of investor presentations, Cia Energetica de Minas Gerais has been a leader in energy efficiency and energy innovation.
Despite all these positive signs, Wall Street analysts are still relatively mixed on the stock. 6 analysts have a “Buy” rating on the stock, 5 have an “Outperform,” 2 have a “Hold,” 9 have an “Underperform” and 5 have a “Sell” rating on the stock. On February 17, J.P. Morgan Chase upgraded the stock to “Overweight.”
But back to the idea of CEMIG being a play on the Brazilian economy. The company is also included in the Global Dow, which is an index meant to track worldwide stock performance. So, instead of investing in Brazil via a mix of different companies or funds, you can simply invest in CEMIG directly.
Going forward, then, investors should keep a close eye on developments in Brazil, especially the aftermath of the political mess that led to the impeachment of President Dilma Rousseff. In the months after her impeachment on August 31, there was a cloud hanging over Brazil. But in 2017, that cloud may be dissipating, and that’s good news for investors. If you’re confident about Brazil as one of the world’s great emerging markets, and aren’t concerned about the Trump administration’s desire to re-think its trade relationships as part of NAFTA, then one option might be investing in CIG as a way to profit from any growth in the Brazilian economy. For more news on Cia Energetica de Minas Gerais CEMIG-ADR (NYSE:CIG) and other fast-moving penny stocks, please subscribe to OracleDispatch.com below.