Performance Sports Group not performing

Jan 20th, 2016 – 1 Comment

FX a major factor in this case


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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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PSG LOGO

Hi Lou,

Could you take a look at Performance Sports Group?

Thanks,

Mike

 

Hey Mike,

Thanks for the assignment. This will be the first time that I evaluate the patterns for Performance Sports Group Lt. (SPG TSX). The company produces equipment and apparel for ice and roller hockey, baseball and softball, and lacrosse. SPG also has a line of soccer apparel. Some of the brands in the portfolio include Bauer, Easton, and Maverik.

In an effort to push their hockey brands in a high profile retail environment the company has opened a few outlets called Own The Moment. The company earns 42% of its revenue from the United States, 24% from Canada, and 34% from the rest of the world. The problem  with the business is that the U.S. dollar has been running higher which crushed 58% of sales volume on a foreign exchange basis.

A probe of the charts will inform my thoughts on this investment.

 

 

PSG

The three-year chart depicts a stock that enjoyed a sweet advance that started in August of 2011 near $5.50 but topped out at its 52-week high of $26.10 in May of 2015. The uptrend line was breached in June of 2015 as was  support along the 50-day moving average. July saw PSG break below the 200-day moving average and in August a death cross confirmed that investors could expect continued selling pressure. Keep in mind that for most of  August the shares were fetching close to $20.00 so there was ample opportunity to get off the ride and preserve capital.

Also evident is the resistance along the 50-day moving average and the series of lower highs and lower lows.

 

PSG2

The six-month chart provides a close-up of the resistance along the 50-day moving average that has led to the 52-week low of $8.42. The MACD and the RSI both generated sell signals in early December of 2015 when the shares were trading above $15.00. The break below support at $13.00 in January of 2016 indicated that there was more pain in the offing.

If you are planning to bottom fish this name wait for some signal of a trend reversal. Unfortunately that may come in time but not at this time.

 

In the analysis to follow I will examine the case for Summit Industrial Income REIT (SMU.UN TSX) for Allan.

 

Make it a profitable day and happy capitalism!

 

 

 

 

 

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