Spyglass Resources Corp. proved the skeptics correct

Jan 26th, 2015 – 1 Comment

SGL was not able to deliver on the promise of improved performance and a sustainable dividend


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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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SGL LOGO

Bought this stock as AvenEx Energy in 2013. It has since merged into Spyglass. My average cost is $4.33. The stock has tanked ,especially this fall. The company announced their intension to buy back their own stock, to in my words, prop up the price. There has been some insider buying by management. What is your take on this stock.
I appreciate your advice and wisdom
Jerry

 

 

Hey Jerry,

Thanks for the assignment and your kind words. I previously ran two studies on AvenEx Energy Corp. The last on January 11, 2013 when the shares were trading for $2.74. Steven had read the first analysis published in 2012 and he wanted my take on the stock.  The research indicated that on December 16, 2012 AvenEx had agreed to merge with two other companies to form Spyglass Resources Corp.(SGL TSX). The deal was for investors to receive one share of SGL for every share of AvenEx. At the time of the merger announcement Avenex was trading for $3.32.

The rapid decline in the trading value of the stock post announcement provided a clear indication of investor sentiment towards the merger. The deal was approved by a slim margin of shareholders by late March of 2013. Unfortunately the skeptics were proven correct. SGL was not able to deliver on the promise of improved performance and a sustainable dividend. The dividend was cut in August of 2014 and eliminated in December of the same year.

An inspection of the charts will assist in providing you with addition context on how best to proceed with SGL.

 

SGL

The three-year chart indicates that the stock was holding onto support at $1.50 until August of 2014 when it got sideswiped by declining energy prices. That however was cold comfort to investors like yourself who were holding onto shares for which you had paid a significantly higher price. The object lesson in this analysis is that your first loss is usually your best loss. Capital preservation is central to asset management. As with all aspects in life the sooner your can admit you made a bad call the better off you will be.

 

 

 

 

 

 

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The six-month chart tells the tale of a severely oversold stock where sellers are in control of the market. There isn’t much evidence to suggest that we can expect a trend reversal or much in the way of a bounce. The best advice at this point would be to hold until the end of the tax year in the hopes of a recovery in energy prices and then sell it for the loss against other gains.

Make it a profitable day and happy capitalism!

 

 

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