Pengrowth Energy Corp. only for those with an appetite for risk

Jan 6th, 2016 – Comment

Lower highs and lower lows are symptoms of a stock in distress


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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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PGF LOGO

Lou,

I find Pengrowth really interesting. Derek Evans is of an incredible pedigree, his father being Dr. John Evans & his mentor being Clayton Woitas.

It is at an all-time low yet their EBIT & debt is average in the industry. Hedged 75% of their production thru 2016, divested of a lot of none core properties.

Don’t understand why their price is dropping and all I can see is huge upside when oil prices turn around.

Thoughts? The worse that could happen is they get swallowed by Cenovus or Suncor.

Dave

 

Hey Dave,

Thanks for the assignment. This will be the eighth time since 2012 that I undertake a study of Pengrowth Energy Corp. (PGF TSX). The last time was on June 12, 2015 on a request from CJ. He was struggling with a sell decision and wanted a second opinion. The research indicated that the stock had been selling off since June of 2014 as the price of crude oil started its retreat from $105.00 per barrel.

The shares were trading in a range up to that point in 2015 with support at $3.10 and resistance at $4.20. It was advised that before hitting the sell button CJ should trade the stock in the range until there was better indication of a breakout or a breakdown. By the end of June 2015 PGF melted through support and began a precipitous decline to its current levels.

You cited the pedigree of Mr. Evans as a reason that you like the stock. In the current environment you may want to re-examine the weight you assign to that factor. Until the excess supply in the global market dries up I’m not convinced that even great management can influence how energy stocks trade. What the sector needs is higher prices for crude oil which may still be in next year country.

I cannot comment on the possibility of a takeover. If that is of interest the best metric to follow is an increase in volume.

An audit of the charts will inform my opinion.

PGFThe three-year chart provides a classic example of getting out when the getting is good. The combination of an established downtrend, a death cross,resistance along the moving averages, and a series of lower highs and lower lows do not support a buy decision.

 

 

 

 

PGF2

The six-month chart is not providing any signals that we can expect a move higher in the near term. The MACD and the RSI are essentially flat and there is continued resistance along the 50-day moving average.

If you want to hunt this wounded animal track the trading volume and see if PGF can break above resistance at $1.20.

Next time I will probe the situation at Advanced Micro Devices Inc. (AMD NASDAQ) for Bob.

 

Make it a profitable day and happy capitalism!

 

 

 

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