First National Financial Corporation still has more to give

Jun 10th, 2016 – 1 Comment

Caveat – watch out for government interference in the real estate market


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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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FN LOGO

Hi Lou,

First National has had a great run over the last couple of months and it issues a great dividend. What are your thoughts on this company going forward? Will it continue? Might there be a pullback? I would appreciate your perspective.

Regards,

Gordon

 

Hey Gordon,

Thanks for the assignment. This will be the second time that I examine the situation at First National Financial Corporation (FN TSX). The last time was on July 23, 2014. The shares were trading for $23.19 with a dividend yield of 6.47% and Robert requested an analysis. FN operates in the mortgage space originating, underwriting, and servicing the debt instruments. Their coverage includes single family and multi-unit residential as well as commercial mortgages.

The research conducted on his behalf indicated that FN was pulling back from resistance near $25.00. It was identified that a symmetrical triangle had formed while the stock held support along the 200-day moving average. The symmetrical triangle, which is a continuation pattern, led to the conclusion that buying pressure was building to send the stock higher. It was advised that a trade was setting up ahead of the release of Q2 results.

We got a slight lift to the end of July to $23.85 but that was all the trade had in it. Another inspection will help answer some of your questions.

 

 

FN

The three- year chart highlights the retreat to a 52-week low of $16.00 in August of 2015 where the stock caught a lift to resistance at $22.00. There was a pullback to support near $19.00 at the beginning of 2016 followed by a new leg up that drove the shares to the 52-week high of $32.00 in June.

 

 

 

 

 

 

 

 

FN2

The six-month chart highlights the buy signals generated by the MACD and the RSI in late February as FN began a very profitable move higher.  What is evident is the resistance that has come in at $32.00 and the overbought situation currently at hand.  Make sure to include the dividend yield of 5.42% in your evaluation.

From the evidence uncovered it appears that there could be a slight pullback but the stock is enjoying support along its uptrend line and there is no indications that we could be in for a trend reversal. One caveat is the potential of the government interfering in the real estate market. There is all kinds of noise in the papers about the health and risks in housing which can motivate jug headed politicians to act when they should sit down and do nothing.

 

 

Next time I’ll take a look at Baytex Energy Corp. (BTE TSX) for Terry.

 

Make it a profitable day and happy capitalism!

 

 

 

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