Year: 2016

FFH, Fairfax Financial.

Hamilton

We caught the $50 low back in 2003, but otherwise it was mostly hit and miss. Not the sort of thing that you want from this blog. So here then is the perfectly correct prognosis of where FFH is going.

FFH feb 11 2016

First of all, as always, we start with the big picture. Back in the nineties this stock came from nowhere and immediately rose to prominence. Wood Gundy was literally salivating at the mouth when it hit $600, expecting a few hundred more. Well, we got $150 more but it did take 18 years to do. That is a long time of explaining to do for the rookie investment advisors who bought into the hype. The stock quickly dropped to about $50, or down 92%.  It climbs back fairly linearly and oddly the 2008 great recession barely registers as by now the world knows that the top dog at this company is a short seller, making some wonder if this is an insurance company or a hedge fund.

From an EW perspective we cannot determine precisely where we are. However, roughly in the middle there is this near perfect expanding triangle a-b-c-d-e. These gems are always either a B-wave, or a wave 4. In this particular case it matters little which scenario you prefer as the outcome is the same, at least to about $325. As we get closer we will provide more detail. For the moment we can get one more minor push up and then this stock should tank. We would not wait for that. As the saying goes, low tide strands all boats, even the best.

On a completely different note, even if you are not Dutch, this is worth watching/listening to;

https://www.youtube.com/embed/66-A2MyVDbU

MFC update

Hamilton

We were amiss in showing a new blog for Sunlife and not Manulife yesterday. We were reminded of that by the annual report that came out today. So here it is;

mfc feb 11 2016

We have referred to this company as the canary in the coal mine. A better name would have been the turkey in the QE mine field. Unlike SLF this stock never really made it any higher than the point it reached less than a year after the “great recession”. Most “financials” went up quite a bit more, some went well beyond the 2007 highs.

These guys are very meticulous, just take a look at their lawn on Bloor street. They are also hugely inefficient, just look at the treasurer’s office in the relatively new building in the back. It is – or at least was – the size of a small football field, the largest I have ever seen for a Treasurer/CFO whatever.

The years results were OK were it not for that small and irritating item about energy;

  • Reported investment-related experience charges of $361 million in 4Q15 and $530 million in 2015. The investment-related experience charges were driven by fair value adjustments to our oil and gas investments, which amounted to $250 million in 4Q15 and $876 million in 2015. In addition, updates to cash flows used in actuarial modelling and future tax impacts also contributed to investment-related experience charges in 4Q15.

We are not sure how they managed to lose so much. Isn’t that what mutual funds and etf’s are for?? Your client loses but not you. These guys are big in Asia, in fact that is where most of their growth comes from. If we were anticipating some sort of black swan, we would have thought that it would be coming from that direction rather than oil. May happen yet.

The stock is down more than 11% (in US$ terms) today with a C$15 handle. For full disclosure, I once worked for this company.

 

mfc may 28 2012

From this May 28 2012 chart a different count could be inferred. That is 5 down followed by and a-b-c up, that may or may not be complete, and now another 5 down. This is highly improbable given the action in other financial stocks.

DGC update

Hamilton

DGC feb 10 2016

We have made some good calls on this stock. Right now we are not at all sure what to make of it. We think it is ahead of itself big time. The recent low was around $4 and we got to $21 which is a fivefold increase. Were we to apply that to ABX we should have that stock around $40. Goldcorp went from a low of around $13 to $21 but should have gone to $65, which would have been a new all time high. DGC is new and big and is not making money. Recently they came out with a new LOM, a Life of Mine plan, a little bit like getting a facelift. This is the first time that this was done by DGC’s own technical team!

There is something missing in the equation. Perhaps this is the new darling of the goldmines but we just cannot escape the feeling that this one is a tad ahead of itself.

In EW terms, as said, it is not clear but one possibility is a double zig-zag, that is an a-b-c X a-b-c. If you like head & shoulder stuff , that would be pretty scary too. Time to sell.

I looked at my previous blogs and notice that the low was actually more like $3, which makes the above math even worse. Our target then, exactly a year ago, was actually $28. The problem is that they are doing it alone.

If wrong this stock could go straight up, as in a series of 1-2’s. We would now be in 3 of 3.

SLF, Sunlife

Hamilton

The not so usual part 1 and part 2 charts;

           slf part 1 feb 2016    slf part 22 feb 2016               

On the left are the guys that bring your fat cheque right to where you happen to be on the beach in the Caribbean or on the golf course. They are the wealth managers of the future and do life insurance on top of that.

They demutualized in 2000 and basically took off by tripling, peaking in 2008. Had I told you then that the stock would almost return to that starting point, that is lose 2/3 of its value you would not have believed me.

Just for fun I brought up another chart. At first blush you must agree that they look pretty similar. So if now I would suggest to you that this stock might lose 2/3 of its value, you would, again, not believe me.

So here is what we are looking at;

slf 10 feb 2016

There is a small difference between the 2008 drop and the one that is coming. The first drop was an A wave in a “flat” which consists of an a-b-c all though the b is often barely recognizable. The coming C wave should be a straightforward 5 wave sequence without any b or pause. It should, if anything , go down faster. Why we do not know but China may be part of it.