Genworth MI Canada Inc. struggling with a downtrend

Feb 20th, 2015 – Comment

The three-year chart outlines a stock that had a great ride starting in 2012 which sadly came to an end.


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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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MIC LOGO

Hello Lou,

Can you tell me your analysis on Genworth MI Canada.
With low interest rate and a low CDN dollar, do you see a bottom here for this company?

Thank you.
Mario

 

Hey Mario,

Thanks for the assignment. This will be the second time that I investigate Genworth MI Canada Inc. (MIC TSX). The last time was on February 13, 2012 when the shares were trading for $21.82. Matthew wanted my take on the stock and why it wasn’t trading closer to its $27.00 book value. The research indicated that the shares had just bounced off a 52-week low of $19.11 and were meeting resistance at $23.50. The pullback had the stock testing support along the 50-day moving average and it was advised that if he owned the stock to hold it and if he intended to buy it that it would be prudent to wait and see if support held before jumping in.

The 5.3% dividend yield was the rationale for suggesting that existing shareholders continue to hold the stock. The call for new investors to wait was driven by the uncertainty cast on the stock by the MACD and the RSI which were pointing towards continued selling pressure. As events transpired the analysis was correct. MIC went on to confirm a bottom near $15.00 by August of 2012 where it began a new uptrend leading to a 52-week high of $41.98 by late November of 2014.

Another survey of the charts will help identify if the stock is about to reverse the downtrend that has been in play since the November 2014 highs.

 

 

MIC

The three-year chart outlines a stock that had a great ride starting in 2012 which sadly came to an end. The patterns that are of concern are the breach of support along the 50 and 200-day moving averages, the new down leg that started from the highs in late November of 2014, a death cross that formed in January of 2015, and the lack of support until $27.50. Worth mentioning are the sell signals generated by the MACD and the RSI as the shares topped out.

 

 

 

 

 

 

 

 

MIC2

The six-month chart highlights the sell signals generated in late November and the continued selling pressure that has humbled the stock. The dividend still produces a 5.2% yield but is it enough to chase a stock in a downtrend? I would advise against it as it doesn’t appear that we can confirm the bottom. Be patient and watch the charts ahead of the next quarterly report in April.

Next time I will inspect the situation at Reitmans Canada Ltd. (RET.A TSX)

Make it a profitable day and happy capitalism!

 

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