Lou,

I enjoy your insights – perhaps you can enlighten me on the short/ medium & long term outlook on BIN.

Thanks,

Bernie

Edmonton

Hey Bernie,

Thanks for the assignment! I last analyzed the shares of Progressive Waste Management Ltd. (BIN TSX) on August 17, 2011 at Carol’s request. The stock closed at $19.77 that day and it was advised  that the downtrend didn’t appear ready to reverse.

A review of the charts will provide further evidence to help determine how to manage BIN.

The three year chart depicts a stock that is still struggling to move higher. There are a number of issues on the chart that need to be noted. Resistance along the 200 day moving average in October and resistance along the 50 day moving average in November. In addition the death cross that surfaced in August has not been resolved.

The RSI and the MACD are not currently signalling a shift in momentum to the upside on the six month chart. The stock has to hold at $19.00 if it is going to make a serious run at a new leg up.

I am still cautious about the prospects for BIN. It made a nice run to $23.75 in October, but gave it all back. Generally I am not tempted to chase a stock that doesn’t satisfy my criteria for a buy. Missed profits are soon forgotten, booked losses are always with us.

If you like the story, keep it under surveillance and watch for a bounce off of support. But keep in mind that it is going to take a lot of heavy lifting to reverse the downtrend.

Make it profitable day and happy capitalism!

Could I please have your opinion on BIN? It had pulled back about 2 dollars even before the stock market decline. It then went as low as $18.88 and now moving up a little.

Thanks,

 Carol

Hi Carol,

Thanks for the assignment. Progressive Waste Management Solutions  (BIN TSX)  is the third largest non hazardous solid waste management company in North America. Whenever I look at the waste management sector I remember a conversation I had with the founder of the Small Hope Bay Resort in the Bahamas. Back in the late 1970′s I had the good fortune to meet Dick Birch who advised that if a young man wanted to make money he would take all the waste people created and find a way to manage it responsibly. Great insight from a great man.

 BIN has positioned itself in a niche market that offers opportunities for growth from continued expansion of demand and focused acquisitions. The charts will provide some answers to your question regarding direction.

The three year chart paints the picture of a stock that has breached support  after trading sideways  for the last year. The breakdown started in early July of 2011 as some investors started to look at issues that include changes in management, insider selling, and the probability of a dividend increase. By mid July the shares had broken below the 50 and 200 day moving averages which was like throwing gasoline on a fire.

The six month chart illustrates the stunning decline that has BIN in its clutches.  It did catch a bounce off of $19.25 and is struggling to climb back over $20.00 where it has support. The RSI and MACD have both made a turn and should be helped by the announced buy back of 4 million shares announced on August 17, 2011.

I am not convinced that BIN is on the verge of reversing the trend just yet. There is a caution flag on the track for BIN with  a death cross on the chart and an advance fueled by the announcement of a normal course issuer bid.  Best to confirm the bottom before committing capital in a downtrend.

Make it a profitable day and happy capitalism!

Hi Lou,

I have enjoyed your analyses and advice on various stocks for other people. My question is about Bennett Environmental (BEV-T). I checked different sources which recommended it as a strong buy. However, since I bought it, it has gone down steadily. I would like to seek your opinion as to its future in the short, intermediate and long term?

Thank you and best regards,
Johnny in Calgary

Hi Johnny,

Hope you had a great Stampede this year! Bennett Environmental had its best run leading up to the highs just over $25 back in 2003. But for years it was a disappointment. It did have a good run from a rock hard bottom of $0.125 in February of 2009. But that advance has stalled and its time to review your position.

The three year chart paints the picture of the solid move to a high of $3.40 over the last 18 months. Unfortunately for you the story of a buy recommendation is not being confirmed by the chart. The stock is testing support on its 200 day moving average and is meeting resistance on its 50 day moving average.

The MACD generated a sell signal back in April of 2010 and continued to identify a downtrend to a low of $1.75 by which time BEV had surrendered 50% of its value.  Its not hard to imagine that some of the investors who caught this ride were motivated to get off and preserve their gains. In the case of small cap stocks it is prudent to book profits when available.

The six month chart illustrates the decline from the highs and the current state of affairs. This stock needs to break above $2.40  and build a base at that level to drive a stake in the heart of the sell off that has been sucking the life’s blood out of it. The problem that I see with the bounce off of $1.80 is that the volume has been thin. Average daily volume  over the last three months has been over 200,000 shares but volume has not even been close recently.  What that tells me as the jump in the stock could be a  head fake.

Capital preservation is one of the main objectives of asset management. You have to ask yourself how much more you are willing to risk on a fundamental recommendation that is not confirmed by the direction of the stock price?

Happy Capitalism!

Keith  from Vaughan, Ontario writes about Cap and Trade:

Lou

I hear a lot about CAP and Trade. What is the best way I can invest to take advantage of this?

Hi Keith,

Great question given that the U.S. Clean Energy and Security Act just squeaked through the House of Representatives by a vote of 219 to 212 and still has to pass through the Senate. But regardless of the final form of the Bill and when it passes I think we have to be prepared for changes in how we use energy.

Cap and Trade was the system that helped remove sulfur emissions that caused acid rain and did so at considerably less cost than everyone expected after the passage of the Clean Air Act of 1990

How it works is that every emmitter, in this case of greenhouse gases, will be given a limit on the amount of gas they can produce as a result of their operations. They will be given a permit for a specified allocation.Over time the limits get stricter forcing companies to put in place an ongoing process of reducing their emissions through investment in mitigating technology.

There will be heavy emmitters and low emmitters. Companies that can reduce their emmissions more easily will have permits to sell to those that can’t move as quickly. Capital will flow to those most willing and able to get below their limit as quickly as possible.

The estimates of the value of a cap and trade system range from $50 billion to $300 billion per year in the U.S. which should get the ball rolling towards the goal of reducing CO2 emmission.

At this point there will be no direct way to participate in the trading of permits. It will likely be an over the counter market that serves market particiants directly. There could be the development of a trading vehicle for financial interest to trade in the permits but that system isn’t in play yet.

How can you profit from a cap and trade system on CO2? Start sorting the pile into big emitters who are slow adapters and big  emitters who are fast adapters. The fast adapters will get under the cap aggressively in a short span of time and have cap room to sell. The additional capital flowing to them will provide a strategic advantage for a period of time.

I would start by looking at companies like Suncor. CEO Rick George has been a long time proponent of preparing for this eventuality and has built a culture within the company to adapt to the storm clouds  that they saw on the horizon 15 years ago.

But don’t stop there! Generate a list of prospects who are best able to adapt quickly and  don’t forget suppliers who have disruptive technology that will get them to the finish line faster and at lower cost. Then look at the charts for those companies and see where the trend is taking them.

Happy Capitalism!

Hi Lou

I heard you speak a couple months ago water stocks being a good long term buy. Can you give me some direction, companies, stocks that I should be looking at?

Keep up the good work

Warmest Regards
Stephen

Hi Stephen,

There were a number of reports that got me thinking of water as a vital resource. The first was an announcement from GE that their corporate goal is to reduce water use by 20% in the next five years. The second was news from Archer Midland Daniels that they expected water for agricultural use will come into short supply. The third piece of information came from T. Boone Pickens who it turns out holds huge water rights in the U.S.

What those three pieces of information told me was that there were people smarter and richer than me positioning their organizations to better manage how they use and control water.

When I look at a broad macro theme like water I look to a mutual fund or exchange traded fund that is positioned in the sector to see where the trends are going. I found three ETF’s that invest in the water business.

The Claymore S&P Global Water ETF

PowerShares Water Resources Portfolio

PowerShares Global Water Portfolio

The Claymore S&P Global Water ETF, CWW TSX, has been in a sell off since July of 2007, but what hasn’t. It looks like it has support at $17.00 but the MACD isn’t signaling a turn just yet.

PowerShares Water Resources Portfolio, PHO AMEX, is focused on US opportunities and has the longest track record. The chart looks the most attractive and there is support at $20.50 and resistance at $22.50

The last is the PowerShares Global Water Portfolio, PIO AMEX, whose chart doesn’t seem to be finding much support.

Criterion also offers a water mutual fund in Canada.

The next part of the analysis is to go through the holdings of the ETF’s and mutual fund to examine the companies they are holding and try to better understand the sector and separate the sheep from the goats.

Between now and the end of the year I will analyze the holdings in these portfolios to gain a better understanding of the opportunities in water and share the results with visitors to the site.

Happy Capitalism!