Alaris Royalty shaking off a gap down

Aug 10th, 2016 – 1 Comment

Offers a dividend yield of 6.59%


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What is your take on AD after its recent big drop?

Glenn

 

 

 

Hey Glenn,

Thanks for the assignment. Alaris Royalty Corp. (AD TSX) creates partnerships with private companies looking for non-control equity participation. The company derives 69% of its royalty revenue from partners in the United States and 31% from partners in Canada. Exposure to Western Canada only represents 6% of the portfolio. The fly in the ointment for investors has been the issues related to KMH a healthcare company with clinics in the U.S. and Ontario.

The major concern with KMH has centred on the fact that the royalty stream to AD stopped in November of 2014. The reason that investors pick up a stock like AD is for the income. If there is any threat to that income stream you can expect a torrent of selling to pound the value of the stock lower.

A review of the charts will identify some of the factors in play when it comes to this investment.

 

AD

The three-year chart indicates that 2015 was a challenging time for investors who failed to act on the multiple sell signals that included the breach of support along the 50 and 200-day moving averages in May and the death cross that formed in June. The retreat took the shares to a 52-week low of $21.00 in January of 2016. The stock caught a bounce off the lows and ran to resistance near $31.00 and the formation of a double top.

A double top is a reversal pattern which set the stage for the gap down in July of 2016 which prompted your query.

 

 

 

AD2

The six-month chart indicates that AD was oversold as we came into August which prompted traders to hit their buy buttons as the stock bounced off support near $23.00.  At this time you can see the resistance that has come in near $24.50 which might put the brakes on a run to resistance along the 200-day moving average near $26.00.

If you are looking for income AD offers a dividend yield of 6.59% but it would be wise to wait for signals that buyers are excited about pushing the price higher.

 

Next time I will begin an investigation of solar energy stocks.

 

Make it a profitable day and happy capitalism!

Categories: Asset Management
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