The one at the top is from June last year, looks like it did the “or B” longer version of the triangle. Anyway from $3,95 we are up about 25%. Relatively speaking this one can go a lot further.
Month: January 2011
POT
Then and now. chart on left plus text gave the expected trajectory. We were in a wave 3 expected to end at $160 or so. In reality we went almost a dollar higher. then we got wave 4 that lasted almost 3 months and took the stock down about $25 or so. A first wave up and second down followed and more recently we are in a third wave of 5. That implies that we need a 4 (most likely a triangle or flat) and a 5th to complete the sequence. How far it will go is anyone’s guess. Recently RBC put it in the focus list (may explain the self fulfilling action the last few days!)and MOS reported excellent profits.. Perhaps 170 or even 180. However after that we go back to $135 or lower, maybe a lot lower. Keep an eye on this stock and be ready to step aside.
BP (see also our July 16 comments).
Now we know who did it, or at least what – a lack of a culture of safety – at BP, but also Transocean (RIG) and Halliburton (HAL). Not that difficult to prove. Makes one wonder why we cannot prove the same for the financial disaster that preceded it, after all many of the players are the same ones or in comparable positions, Dick Cheney & Bush, Rubin , Gramm both Phil and Wendy, Cox , Greenspan, Ayn Rand and so on, all contributed to relaxing regulations and or emphasized the market’s inherent ability to self correct itself. Tony Hayward was essentially sent, almost literally, to Siberia for making the rather honest statement that he would not mind getting his life back, Greenspan , on the other hand, who has never been honest about anything is still basking in the sunset years of his career as maestro.
Anyway the stock reached our target (we are already out) at the expected level of about $47. Sure it can go higher by why not leave good enough alone. See chart;
The chatter now is that Royal Dutch was thinking of taking it over but never moved into action. What the chattering classes of investment advisors seem not to know is that Royal Dutch, contrary to it’s name, is actually 60% Dutch and 40% English, being the merger in 1907 of Koninklijke Olie and Shell Transport and trading so a further takeover of British Petroleum would have made the whole thing even more British. (comparable to Unilever). However they balked at the unknown risks and passed. The question now is , if one of the largest companies in the world passed on the opportunity at <$30 why would anyone else get excited at >$47?
If we had not already sold at $44 or so , we would do so now.
MFC and Happy New Year
Manulife is one of my favorite stocks, not only did 3 of my predictions come true pretty accurately, I can also claim a slight advantage of having worked with these guys. This is not a small company, supposedly they are the largest insurer in North America and one of the few companies well positioned for business in such hotbed economies as China and India. In Canada they are best known for their meticulously manicured front lawn on Bloorstreet and their “performax” – one size fits all – life insurance product. As mentioned before, all this went to their head and they became so cock-sure of their own marketing nonsense that they made the cardinal mistake of actually believing it. Their biggest sin was that they applied the near certainty of mortality tables to the not at all certain economic statistics, particularly the one that says stocks never go down over 10-year periods. This delusion quickly moved the company from a boring and staid insures to a bell-weather of the stock market itself, albeit with a much larger amplitude in its volatility (why we recommended it at $11.25).
In our last few comments we recommended the stock as a buy for a $3-$5 minimum rally. It has done that and more. We would sell it today, it could go higher yet but that is where the probabilities change rapidly, furthermore a +- 40% profit is not a bad thing to take. The company is mending its ways, now it has cut 25% of its exposure by shorting 5bln notional equity futures and a few other things. These “hedges”now cost a lot more than they would have 2/3 years ago! They hope to do more and be “hedged” up to 60% in a year or so. They are damned if they do and damned if they don’t. The costs are going to eat away at their profitability. For some odd reason the market just loves these guy after hating them 5 months ago. EW wise the stock could easily rise further to say $20 but , unless you use a tight trailing stop-loss this is not the time to stick around.