Month: August 2011

RBC’s Focus List fund

Hamilton

focus list 2

This chart is from Jan 24, 2011. The fund had not yet reached the 61.8% retracement that one would expect, calculated at that time at about $19.61  The prediction then was that the fund could once again lose 50% of it’s value! Here is where we are to date;

focus list 3

The fund actually peaked a few weeks later at $20,09 about 2.4% above the “ideal” level, assuming that was calculated correctly. We did not stay there very long and are now down 20.67% from that high. Just like with the initial decline, the fund gyrates a lot without going anywhere initially and consequently a solid retracement would not be all that surprising. But in the end it is going much lower, well under $10. Already the 5 year return is a negative 2+% and this will get a lot worse.

The question is why do they not chose their stock portfolio better?, after all these guys are not stupid (apart from a few notable exceptions). The problem is that in this fund RBC is the market and consequently cannot escape whatever fate awaits the market. But you can.

WFI, WaterFurnace Renewable Energy Inc.

Hamilton

wfi

WaterFurnace builds units (essentially compressors) for geothermal applications. They extract the heat from the ground (roughly 15 to 16 degrees C.) and then upgrade it to a useable level for home heating. For each unit of energy that goes into the system, 5x as much is returned in heat. Large in ground loops extract this energy by running water (and anti-freeze) through them, so in a manner of speaking these units appear to be burning water, hence the name. The technology is not new, it is the same one used by Frigidaire a hundred years ago, but it took time to overcome some of the corrosion problems. High fuel prices and low interest rates certainly helped to put this on the map.

The stock completed a 5-wave sequence. The middle high point (there are 3) is the real one, which by the way, is another good example of getting out at double or triple tops. The correction seems to be taking the form of an A-B-C. Presently we are somewhere in the 3d wave. Typically we should drop to a 62% retracement, a little above $12. Typically wave C relates to wave A by a factor of 1.62X which suggests $12. Before we get there we still need to finish 3 and go through 4 and 5. $ will most likely be a flat or triangle (alternation) so we can monitor this one as it moves to the expected target.

The stock pays 4.18%.

EK , Eastman Kodak update

Hamilton

ek aug 17 2011

Almost a month ago we recommended EK as a buy at under $2.25. It went 50 cents lower but is now getting it’s bounce, dead cat or otherwise. At a larger degree (see previous blog) wave 4 is around $30, that is not what we are aiming for. We play just to harvest the certain part, or at least , the almost certain part. The wave in the above chart has 5 subdivisions, clear as daylight. The stock should then return to the level of the 4th wave, in this specific case a triangle. That level should be >$3.50 and < $4+. If you are extra safe take the lower number and you will still have gained 55%.

A return to $5.75 is not that much of a stretch,aiming for that should depend on how we get to $3.50+

COS.un , Canadian Oil Sands.

Hamilton

cos 2011 l

cos.un sept 2010

These are old charts going back to early November 2010, below is what actually happened;

cos aug 2011

The stock did not quite make it to $39, it reached $34 simple because the c wave was only 62% of the a wave instead of being equal.It essentially failed to record a new high, a potentially very dangerous signal . That is why you have to look at the commodity as well to get a feel for when a stock may turn. Since peaking the stock has lost about 1/3 of its value. At the moment a good bounce may well be in the cards but ultimately a new low should be anticipated. I am not sure at what price for oil the existing investments become “stranded” but it is somewhere around $40 to $60 for the industry as a whole. In the stock market there are no negative values, in economics there definitely are. They occur when the operating cost exceed revenues for an extended period of time and the best choice is to abandon the operation. Certainly not a likely event, but the question is how close can we get to it. This is what Schumpeter’s creative destruction is all about.