Bonavista Energy Corp. is tied to natural gas

May 10th, 2013 – Comment

There has been some recovery in the price of gas and a lot of speculation that it is the hot spot in the commodity space.


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Lou,
May I please have your thoughts on BNP. I have held this asset for some time but of late it as been deteriorating rapidly – is this because of its exposure to natural gas or something else I should be aware of?

Thanks

Jack

 

Hey Jack,

This will be the third time that I examine the case for Bonavista Energy Corp. (BNP TSX). The last time was on January 23, 2012 when the shares were trading for $22.26. The RSI indicated that the shares were oversold but the MACD was not signalling a shift in momentum to the buy side. The stock offered a dividend yield of 6.5% and it was advised to wait for a test of support at $22.00 before making a decision. Unfortunately support did not hold and the shares traded down to $13.00 by July of 2012.

The shares did catch a bounce off $13.00 as natural gas prices began to recover but the increase in the price was not enough to save the dividend. In January of 2013 the board of directors cut the dividend to $0.07 from $0.12 which sent the shares down to a 52-week low of $12.24 in February. The stock then started another run off the lows that took it to over $16.00 in May of 2013.

Another study will help determine how best to proceed with this investment.

 

 

The three- year chart indicates that the stock has broken above the 50 and 200-day moving averages and is testing resistance at $16.00. Also worth mentioning is that a golden cross is developing although not currently formed.

 

 

 

 

 

 

The MACD and the RSI on the six-month chart are both rather neutral at the moment and failing to generate much in the way of guidance. BNP has been a heart-breaker for many investors who got sideswiped by the declining price of natural gas. There has been some recovery in the price of gas and a lot of speculation that it is the hot spot in the commodity space.

 

 

 

 

The three- year chart for natural gas depicts a double top which at best suggests a pullback and at worst a trend reversal.

 

 

 

 

 

BNP is a stock that requires constant surveillance. It has suffered with the falling price of natural gas and took another hit when the board decided to cut the dividend. To crib from Rod Stewart – the dividend cut is the deepest.

 

Make it a profitable day and happy capitalism!

Categories: Energy
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