Year: 2015

IGM Financial (Investors Group and McKenzie Financial) update

Hamilton

These guys are about 20X larger than AGF and are more profitable. Nevertheless we expect the direction to be the same. Here are the then, Feb.17, 2015 and now charts as usual;

IGM feb 17 2015IGM dec 22 2015

Eight months ago the stock was at about $44 and just the other day it was at $34 so it is dropping at the rate of about a dollar a month. We expected, and now expect, that the stock will drop to the lowest level of the 4th wave of previous degree which is about $15. It does not have to go that far but the 61.8% retracement at about $21 is a pretty good bet. If it keeps up the pace we could be there by the end of 2016.

Mutual funds and investment dealers are facing difficult times. Charging 3% p.a. is easy if you make 6,7 or 8 plus percent. It gets harder when you are in a 3% , or lower, environment. There are a whole host of regulatory changes, issues with transparency (which is still hard to find), legal position with respect to being a fiduciary or not, and so on. The times that you could charge 10% as a fee (Horizon Fund) or take 3 to 5 full points on a zero-coupon bond are gone and will not come back. It will be a difficult battle if markets cooperate, but an impossible battle if they do not.

Here is another performance comparison, including AGF.B (in black this time).

mutual funds re tsx dec 2015

AGF update

Hamilton

As usual the August 2013 and now chart;

agf.b aug 3 2013 agf dec 21 2015

This is an A-B-C correction that is a 5-3-5 zig-zag as opposed to a 3-3-5 flat. The end result is roughly the same but the interim retracement does not even get close to the top. We had no particular target other than shown by the red arrow, but we pointed out that this mutual company that started  with a good deal of success would become almost irrelevant. Right here might be low enough as the right number of waves can be counted. A buy at $4.50 with an initial target of $6.

Note; This can also be viewed as a double zig-zag. Often the individual A and C legs within each zig-zag are , more or less, vector equal. That would be the case around $4.50 as well.

The 4 cornerstones of their approach (“Style”) are, intelligence sharing, discipline, innovative thinking and people-first. In short what every Tom, Dick and Harry does today. They do, however, have two classes of shares! As of mid-year they had about $36 bln. in assets under management. They could be a good buy for one of the larger mutual fund companies or banks with a cap. of less than $400 mln. Here is the relative performance per the G&M charts.

agf.b dec 22 2015

After energy the mutual fund sector must have been one of the worst, AGF is not alone but it is the worst.

RDS.B update

Hamilton

Again the usual then, August 2015, and now charts;

rds.b aug 2 2015rds.b dec 21 2015

The triangle gave it away and allowed us to predict the upside and the downside fairly accurately. Except that we anticipated a decent ($15 or so) bounce from about $55. We barely got half that as the stock persistently kept going south and now is approaching our ultimate target zone. Usually I draw an arrow for wave C equal as a vector to wave A just to get some idea what might happen. Invariable in the last few years that led to a much too bearish outlook as the stock would not drop at that speed or in that magnitude. So I did not draw that arrow but clearly I should have as we are getting very close to the target range.

Typically the stock should retrace to the 4th wave of previous degree, in this case either $40 or $35 (if there was a larger triangle in wave 4 of 3). The lower end of this range coincidentally also defines where there would be a Fibo.  61.8% retracement of the entire up move (about $34).

Already the dividend yield, and this will no doubt change someday, is about 8.4%. This company alone is responsible for 1/10th of all dividends paid in the UK. In the Netherlands it is the go to stock par excellence for widows and orphans. This , of course, does not mean that the stock cannot drop even further. It does mean that we should keep an eye on it to determine when this 5 wave C wave should come to an end. For the moment somewhere between , say, $39 and $36 fits the chart best;

rds.b dec 21 2015 s

Notice that the RSI and MACD are not (yet) in synch. If you have difficulty to read the charts, just click on them and move them around.

BBVA, Banco Bilbao Vizcaya Argentaria SA , belated update.

Hamilton

bbva dec 19 2012BBVA dec 21 2015

The usual then and now charts with three years in between, pretty much to the day. On a long drive recently I was listening to a radio programme that explained the 10 biggest mistakes investors just cannot stop making. Number 6 or 7, was selling your winners too soon, presumable with its counterpart of letting your losses run too long. I do not think this is necessarily a thinking error as it is more the result of your style, methodology or whatever you want to call it. It is not an error similar to Janet Yellen’s when she recently opined that the length of a bull market is not a factor in the chance of it ending. This is patent nonsense that can only come from someone who has been indoctrinated with random walk theories and does not realize that markets are very path-dependent and do not behave like dice.

     In the 2012 chart we recognized that the path for BBVA (and the IBEX , EWP and Santander) for the previous two or so years had been that of a diagonal triangle, in plain English a wedge. These wedges typically occur at termination points or where the market has gone too far too fast. As a result they usually reverse course and move right back to where they started, in this example about $14 on the ADR. We suggested getting out after a 25% gain, leaving about 75% on the table. This was no doubt too early, certainly with the benefit of hindsight, but it is not an error as such because it fits our “style”.  That is be nimble and move to where the action is (expected to be). The real question is what did you do next to deploy the money.

    Today we have no idea where this stock is going. Last time we were there Franco was still in charge. It will not be on our radar screen un till such time that the EW count is unequivocally clear, perhaps tomorrow, perhaps ten years from now.