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CPFL Energia (CPL - Get Report) is the largest private power company in Brazil, serving more than 6.7 million customers with generation capacity of 2,300 megawatts. While Brazil is an attractive growth economy, it's also a market that's fraught with some risks.
For those reasons, CPL currently sports a short interest ratio of 10.3. At that level, it would take more than two weeks of buying for short sellers to exit their positions.
Like domestic power utilities, CPL is a popular option for income investors who want a slice of this firm's 4.62% dividend yield. As was the case with RY, however, those dividends are based on the Brazilian real, not the dollar, so investors are getting pretty substantial exposure to the country's currency. With the real's less than savory history (and the recent strength of the dollar), it's not a huge surprise that shorts are essentially betting on that dividend to decline on a real basis.
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At the same time, though, Brazil is continuing to enjoy brisk growth, and CPL's top line grows at that same pace. With a strong balance sheet and ample cash generation capabilities through its regulated utility business, CPL should be able to continue to perform at a high level in 2012.
The firm's March 12 earnings release could spark a short squeeze.