Bonavista Energy Corp. a punisher

Nov 20th, 2015 – 1 Comment

Can’t move higher with natural gas trending lower


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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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BNPNewlogo

Hi Lou ,
Is this a good time to buy Bonavista? The dividend is 16%.
Thanks,
Jane

 

Hey Jane,

 

Thanks for the assignment. This will be the fourth time since 2011 that I examine the charts for Bonavista Energy Corp. (BNP TSX). The last time was on May 10, 2013 for Jack who had been holding the stock for some time and was concerned about the rapid value destruction. The shares were trading for $16.03 and were meeting resistance at $16.00. The MACD and the RSI were not providing any strong signals as to direction and it was advised that BNP demanded constant surveillance.

The research identified that the company’s production was skewed to natural gas. The highlight of the chart for natural gas was the double top that threatened to take the price below $3.97 recorded on May 10, 2013.

In retrospect that was the right call with BNP drifting down to below $10.00 by November 2013 as natural gas traded down to below $3.25.

Another inspection of the charts will help in the evaluation of this stock.

 

BNP

The three-year chart for BNP illustrates the same bearish patterns common to energy stocks since the summer of 2014. The highlights include the break below the 50 and 200-day moving averages in July of 2014, a death cross that formed in September, and an established downtrend. What is also evident is the resistance along the moving averages in 2015.

Sadly investors who held on to the stock have had to endure a sell off that has taken their investment to a 52-week low of $2.40.

 

 

 

 

BNP2

The six month chart is not providing any evidence that we can expect a trend reversal in the short term. Every attempt to move higher has met resistance along the 50-day moving average and the MACD and the RSI are not pointing to the start of a new leg up.

Production at BNP is 74% skewed to natural gas. With the price of natural gas at $2.26 it will take a cold winter to burn up some of the supply in storage.

In terms of the dividend yield I would encourage that you re-examine your assumptions. My references are pointing to a dividend yield of 4.94% not 16%.

 

Next time I will investigate the case for Martinrea International Inc. (MRE TSX) for Vince.

 

Make it a profitable day and happy capitalism!

Categories: Energy
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