AGF Management Limited may have to retest $11.00

May 30th, 2012 – Comment

At this point it looks like we will have to retest support at $11.00 before we can make a call on a reversal.


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Hi Lou,

Do you think AGF.B is oversold? Dividend looks ripe for a cut.

Thanks,
Trevor

 

 

Hey Trevor,

Thanks for the assignment. AGF Management Limited (AGF.B TSX) has been offering investment management services since 1957 and is best known for its group  of mutual funds. They have close to $46 billion in assets under management and are said to charge some of the higher fees for their services.

Recently they have had to deal with some of common issues in the industry such as the departure of a star portfolio manager, competitive pressures, and the constant need to gather new assets to feed the machine. There have also been net redemption’s to manage as investors have pulled money out of equities and sought safe harbour in fixed income.

With regards to the sanctity of the dividend, the outlook for 2012 seems clear with a payout ratio of 65%, but as with all things in life, few things are written in stone and handed down from on high.

A review of the charts will provide further insight into the potential for AGF.B as we go through the second half of 2012.

 

 

The three-year chart clearly outlines the downtrend that has been in place since June of 2011 when the shares traded at $18.00. Another indicator worth noting is the inability of the stock to hold support at $17.00, $15.00, $14.00, $13.00, and most recently at $12.00.

In addition every effort to move higher has met resistance along the 50 and 200-day moving averages. At this point it looks like we will have to retest support at $11.00 before we can make a call on a reversal.

 

 

 

The six-month chart provides the answer to your question regarding whether the shares are oversold. The RSI confirms that the stock is oversold and has been through most of the month of May 2012. When a stock has been oversold for an extended period it is generally seen as a sign of weakness.

At this point I wouldn’t be chasing this stock but would continue to watch it to see if it catches a bounce off $11.00 and starts to build a base.

Make it a profitable day and happy capitalism!

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