Bennett Environmental Inc. shredding value

Jul 19th, 2010 – Comment

This stock needs to break above $2.40 and build a base at that level to drive a stake in the heart of the sell off that has been sucking the life’s blood out of it.


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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bennett

Hi Lou,

I have enjoyed your analyses and advice on various stocks for other people. My question is about Bennett Environmental (BEV-T). I checked different sources which recommended it as a strong buy. However, since I bought it, it has gone down steadily. I would like to seek your opinion as to its future in the short, intermediate and long term?

Thank you and best regards,
Johnny in Calgary

 

Hi Johnny,

Hope you had a great Stampede this year! Bennett Environmental had its best run leading up to the highs just over $25 back in 2003. But for years it was a disappointment. It did have a good run from a rock hard bottom of $0.125 in February of 2009. But that advance has stalled and its time to review your position.

BEV

The three year chart paints the picture of the solid move to a high of $3.40 over the last 18 months. Unfortunately for you the story of a buy recommendation is not being confirmed by the chart. The stock is testing support on its 200 day moving average and is meeting resistance on its 50 day moving average.

The MACD generated a sell signal back in April of 2010 and continued to identify a downtrend to a low of $1.75 by which time BEV had surrendered 50% of its value.  Its not hard to imagine that some of the investors who caught this ride were motivated to get off and preserve their gains. In the case of small cap stocks it is prudent to book profits when available.

 

BEV2

The six month chart illustrates the decline from the highs and the current state of affairs. This stock needs to break above $2.40  and build a base at that level to drive a stake in the heart of the sell off that has been sucking the life’s blood out of it. The problem that I see with the bounce off of $1.80 is that the volume has been thin. Average daily volume  over the last three months has been over 200,000 shares but volume has not even been close recently.  What that tells me as the jump in the stock could be a  head fake.

Capital preservation is one of the main objectives of asset management. You have to ask yourself how much more you are willing to risk on a fundamental recommendation that is not confirmed by the direction of the stock price?

Happy Capitalism!

Categories: Environmental
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