Enbridge Income Fund Holdings Inc. suffering with the energy complex

Sep 16th, 2015 – 1 Comment

A pop in December and a drop in February


About the Author

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.


Read the author's full profile.


Further Research

Read more about pipelines.


ENF LOGO

Lou,

I bought Enbridge Income Fund Holdings about 6 months ago.I know the market has declined, but Enbridge has been incredibly volatile over that period and declined far more than the market. My original research suggested that this would be a great widows and orphans stock. What did I miss?

Mike

 

Hey Mike,

 

Thanks for the assignment. This will be my first inspection of the charts for Enbridge Income Fund Holdings Inc. (ENF TSX). The company has investments in energy infrastructure. Enbridge Inc. (ENB TSX) holds a 66.4% economic interest in the fund.

To your question as to what you missed in selecting ENF was that the energy sector as a whole has been under assault as OPEC countries have been putting the squeeze on non- OPEC producers. By keeping the taps open and driving down prices for oil OPEC is putting the knife to the throats of high cost producers which they want to force to the sidelines.

OPEC wants to regain market share and, in my opinion, to put the boots to Russia for supporting the Assad regime in Syria. You might ask what that has to do with a pipeline company like ENF?  With producers shutting in wells that are no longer economically viable it threatens to constrict the volume travelling through ENF’s pipeline systems.

An examination of the charts will further clarify the situation.

 

HOG

First lets take a look at the chart for the Horizon Canadian Midstream  Oil and Gas Index (HOG TSX) which I will use as a proxy for the sector. What is evident is that all the participants have been selling off since last August. From that we can deduce that the problem with ENF is not an internal issue its a situation that is punishing most players in the energy complex, perhaps with the exception of refiners.

 

 

 

ENF

The three-year chart for ENF highlights the lift that started in early December of 2014 as investors reacted to the news that ENB intended to download assets to ENF. The move higher was explosive but topped out in February of 2015 at the 52-week high of $44.93. Given your investment horizon it would seem that you were buying at the top.

Since then the units have been labouring under a downtrend line and a death cross that formed in July. What is also a factor is the resistance along the 50-day moving average which started in June.

 

 

 

ENF2

The six-month chart isn’t providing much evidence that we can expect a trend reversal in the near future. At this point you might be best served holding your position and collecting your dividend that yields 5.3%.

 

Next time I will audit the charts for Pacific and Western Bank of Canada (PWB TSX) for Steve.

Make it a profitable day and happy capitalism!

 

Categories: pipelines
Content © Relentless Economics - Charts courtesy Stockcharts.com - Employees Entrance - Optimization Media