On Friday July 18, 2014, Steve asked for an examination of two companies. The first was Chartwell Retirement Residences. Today the spotlight will fall on Service Corporation International (SCI).
SCI operates 1,638 funeral homes and 515 cemeteries across North America. The company provides services in 43 U.S states, 8 Canadian provinces, the District of Columbia, and Puerto Rico. Starting in 2013 the company increased their sales staff by 7 per cent for a total of 3,850. The focus of the new hires is to increase pre-need sales.
A scout of the charts will help identify the opportunities and risks associated with this stock.
The three-year chart reveals a stock that has had a great run. The first leg up started in October of 2011 and endured until October of 2013. Worth noting on the advance is the golden cross that formed in February of 2012, the intact uptrend line and support along the 50-day moving average. Once the uptrend line was breached in October of 2013 the stock pulled back until February of 2014 where it began another move higher to its current range.
SCI has been consolidating the death-care space for over 40 years and has been building market leadership in prime markets such as Florida, Texas, and California. The company controls approximately 15 per cent of the national market and looks to continue its rollup strategy.
The MACD and the RSI on the six–month chart have generated a number of buy and sell signals and are currently pointing to buyers coming back into the market. The stock pays a dividend that yields 1.55 per cent which just adds that little bit more to the total return. It looks like you have been enjoying a nice ride with SCI and there would appear to be more to come. The first baby boomers hit their 60th birthday in 2006 and with more than 80 million in the demographic it would appear that the trend will support this investment.
A few closing notes to consider. The research undertaken has surfaced criticism regarding the sales practices and higher prices charged by the company which you will have to evaluate separately from the technical side of the stock. What should also be considered is that there is a trend in the industry away from burial and towards lower cost cremation. When you own shares in a company that operates 515 cemeteries you want management to articulate a good strategy to address the shift.
Make it a profitable day and happy capitalism!
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