Year: 2012

India (IFN) and China (CHN)

Hamilton

A year and a half ago we posted this blog;

india and China feb 2011

The question then was how can the World stock markets keep going up if China, the second largest economy is going down, with Japan , the third largest, still down about 75%. Here are the updated charts;

ifn sep 2012chn sep 2012

Clearly both indices are fallowing the anticipated path quite well, having dropped another , give or take , 20 percent over the last year and a half. For those that prefer the pure Shanghai composite index things are actually worse;

Shanghai Composite Index,

Not unlike the Nikkei, this one is down about 67% and moving lower. Clearly of the 16 years on display here the “anomaly” to use a mining phrase, occurred in 2007 with the index climbing more than sixfold. To hope that China is the one country that will pull us out of our present low-growth era is a leap of faith at best.

SUN, Sunoco and ETP (correction from previous blog!)

Hamilton

In the previous blog there is a discussion about a merger between Suncor and ETP, no such merger is contemplated. I simple misunderstood the ticker symbol . My apologies. The merger in question is between Suncor and ETP, Energy Transfer Partners L.P.  Here are the charts;

Energy Transfer Partners L.Psunoco

The two companies are not the same size. Sunoco at about  4.9 bln. capitalization is about 1/2 the size of ETP at 10.33 bln. Both stocks have traced out similar but not identical charts. Still the range is quite comparable, roughly between $70 and $20 and both sport the same pattern, a first major leg down followed by a (B-wave) a leg up. In EW terms this is bearish as typically two major legs down are required to complete a bear market. Since both stocks are presently sitting pretty well in the middle of the range, both should be sold.

All mergers can be compared to the situation in which the pig and the hen decide to start a joint venture selling ham & eggs for breakfast. One of them invariable dies, not necessarily the smallest one either. (think DS and RBC, DS being the winner by any measure). Still in most cases the junior partner has to yield, and size matters.

The interesting thing about this couple is that one is incorporated and the other is not.  It is a Limited Partnership. How the two are to be merged is a bit of a miracle that will take a little bit of legal tinkering. The two companies appear to be active in complementary fields of the energy space. This can be a plus as it broadens the base, it also means that synergies are harder to obtain and that managerial skills are spread to thin.

We would sell rather than figure out the minute details.

SU, Suncor update (#12)

Hamilton

su sept 2012su s sept 2012

This is a special edition for my friends (I hope) at an investment club that I occasionally attend. There are now about 12 entries for this stock, some bullish some bearish. Overall you would have made a lot of money following the advise but I know that most people do not preferring to listen to fundamental bla-bla-bla. The question now is what to do if a merger, read take-over was to occur given the various options offered. The stock in question is ETP, Energy Transfer Partners, shown below.

etp sept 2012

ETP is a 10.7 bln. dollar company, SU at 51.8 bln. is roughly 5 times the size. The stocks behave in roughly the same way, even with similar numerical values so there is no reason to expect one to convey value to the other with the exception of synergies of scale etc. etc. From the perspective of owners of SU the impact should be marginal and accordingly the single most important consideration is where is this stock going on it’s own! That is down after this c leg is complete, approximately to $38, that is if there is a c leg. The ultimate target is at $17 or below, when you have $2 to the upside, perhaps as a result of the noise created by this take-over, and $20 to the downside the answer is quite simple that you do not need to evaluate all the little differences in the options, you need to sell now. One of the cardinal mistakes that investors make is that they focus on trivialities and lose sight of the big picture.

Baidu (BIDU) update

Hamilton

bidu b sept 2012bidu s sept 2012

Baidu has intrigued us, in good Chinese fashion it does not want to reveal it’s intentions. Last time (see previous blog) we were hesitatingly bullish on the stock with an immediate target above $125 on account of the expanding wedge in June and July. It went to $140. For the past year or two the stock has stayed within a narrowing range between $165 and $100 (nice Fibo relationship). Then and now we are ambivalent but prefer the downside this time. The bullish case is represented by the purple triangle which is technically incorrect as both boundaries are downward sloping; they should be in opposite directions. Also we fell out of the channel, tried unsuccessfully to get back in making the blue interpretation more plausible. Also, we have not reached the 4th wave of previous degree ($90), nor have we retraced a decent  (50/60%) portion of the $150+ rise in the previous 3 years.

For the fun of it we have a chart below that has nothing whatsoever to do with Google but perhaps it does with china;

obfuscated stock

I know that the similarities are not perfect but clearly they do look alike and perhaps the common factor is China.  Where one goes the other might go as well. You can move the charts around to better compare. It is an ETF. This triangle, if there is one, is kosher so to speak.