Inter Pipeline Fund a buy

Jan 4th, 2012 – Comment

With the 5.6% yield and the strong business case I would be a buyer until we see a change in direction


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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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Hi Lou,

Could we have your opinion on Interpipeline for 2012. 

Thanks,

 Irene in Kelowna, BC

 

 

Hey Irene,

I last ran the charts for Inter Pipeline Fund (IPL.UN TSX) on October 17, 2011. When Andrew gave me the assignment the units were selling for $16.33. At the time it was observed that there had been a break above resistance at $16.25 and there appeared to be more gas in the tank. Retrospectively the analysis was correct with the price advancing to $18.67 producing a 14.3% capital gain.

A review of the charts will provide some insight into the possibilities for IPL.UN over the next 12 months.

 

 

The three year chart provides a view of the advance that followed my last post. In early November the Board of Directors declared a 9.4% increase in monthly distributions which will always attract investors hungry for yield.

What is notable on this chart is that there is solid support along the trend line and the 50 and 200 day moving averages. There have been tests of support but no serious breaches.

Does that mean that the units can only go up? As we all know the past is history and the future is a mystery.What it does implies is that you have to be ever vigilant and look at the charts of all of your investments each day to see if the situation changes.

 

The six month chart indicates that there is some short term resistance that has formed at $19.00 and that perhaps the lift since the increase in the distributions has gone too far to0 fast.

The best possible outcome for the near term would be for the units to build a base and tighten up the gap between the 50 and 200 day moving averages.

The momentum indicators are not generating strong signals for a buy or a sell. With the 5.6% yield and  the strong business case I would be a buyer until we see a change in direction. The trend is your friend until it ends.

IPL.UN carries 35% of oil sands volume and 15% of Western Canadian conventional oil volume for a total of 800,000 barrels per day. In addition they process 40% of natural gas volumes exported from Alberta. I don’t see much that could upset this apple cart today but that’s why I advise watching your investment every single day. Things change and you have to be informed and ready to act.

Make it a profitable 2012 and happy capitalism!

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