TransAlta Corp. not your father’s utility

Oct 1st, 2014 – 1 Comment

I get the sense that you are bottom fishing this one and just want to remind you to confirm the bottom and not anticipate 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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TA LOGO

Hi Lou,
I would like to ask for your analysis of TransAlta. In November of 2013, your analysis indicated it was not a buy and hold security and had risk of erosion of capital. I am wondering if it is still the case.

Thanks.

Jeff

Hey Jeff,

Thanks for the assignment. This will be the fifth time that I investigate the case for TransAlta Corp. (TA TSX). The last as you mentioned was on November 8, 2013 on a request from Dave. He held four hundred shares and wanted to know if he should sell or hold. The research indicated that the shares had been labouring under a downtrend that started in October of 2011. The stock was trading in a down channel but providing lots of opportunities to trade along the retreat. The dividend yield was 8.29% and its sustainability was called into question. The conclusion was that there was a risk of seeing lower valuations and that it would be wise to trade for profit not just buy and hold.

In hindsight the analysis was correct. In February of 2014 the board slashed the dividend, sold some assets, and reported a Q4 loss. A financial St. Valentine’s Day beat down to say the least. The current opinion from the professional community is negative at best with some outliers taking interest because of how beaten up the stock has become.

Another examination of the charts will inform my update on the shares of TA.

 

 

TA

The three-year chart indicates that the issues identified in November of 2013 have not changed for the better. The downtrend is still the dominate feature which has to be respected. In addition the stock hasn’t shown the ability to hold support at various prices including $13.00 and $12.50. What we need to identify is if all the sellers have been washed out and if buyers are ready to take control of the market. Average daily volume over the last three months is reported as 571,427 shares. Over the last seven trading days volume has been better than average which calls for sustained monitoring for signals of a trend reversal.

 

 

 

 

TA2

The six-month chart puts a spotlight on the resistance that TA has faced along the moving averages. Every move higher has been met with a spate of selling. The spike higher in mid September, as the stock caught a bounce off of $11.50 to the $12.20 range, was dissipated by the end of the month. The MACD and the RSI are not presently signalling a trend reversal.

I get the sense that you are bottom fishing this one and just want to remind you to confirm the bottom and not anticipate it. No sense finding new lows with your hard earned dollars.

Make it a profitable day and happy capitalism!

 

 

 

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