Pengrowth Energy Corp continues to crush investor expectations

Jan 30th, 2013 – Comment

he trend is your friend until it ends and the trend with this stock is down!


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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,

Would appreciate your view on Pengrowth. I can’t believe how it just keeps going down.

They seem to have a lot of good properties and a very large land base.

Thanks,

Doug

 

Hey Doug,

This will be the third time I examine the case for Pengrowth Energy Corp. (PGF TSX). The last time was on November 9, 2012 when the shares were trading for $5.53. John wanted to know if the stock had bottomed out because he thought that $5.53 looked like a good entry point. The analysis conducted on his behalf suggested that the selling that had plagued PGF had not abated and that the stock might have to retest the 1992 low of $4.50. Unfortunately that is exactly what happened.

What I get from your comment is that you are holding onto the fundament story and ignoring the trend. The trend is your friend until it ends and the trend with this stock is down!

Another run at the charts will provide better guidance as to a go forward plan for your investment.

 

 

The three-year chart clearly outlines the problem with the stock. It has been in a death spiral since March of 2011 when it traded for close to $14.00. The resistance along the 50-day moving average has been relentless. Every effort to advance has been met with an more selling. In fact the 1992 low of $4.50 has been breached and that now sets the stage for another set of decisions.

 

 

 

 

 

The six-month chart provides a close-up of the tale of woe and the breach of support at $4.50. The MACD and RSI indicate that the momentum continues to favor sellers. The the take away from this case study is to understand that a good fundamental story will not help you in the face of aggressive selling. Preservation of capital is at the core of investment management. Clearly the stock didn’t collapse overnight. It destroyed shareholder value over a two year period.

Make it a profitable day and happy capitalism!

 

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