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The Curtis Palmer facility near Corinth, New York, a run-of-river hydroelectric facility, is shown in a handout photo. (The Canadian Press)
The Curtis Palmer facility near Corinth, New York, a run-of-river hydroelectric facility, is shown in a handout photo. (The Canadian Press)

Schizas’ Mailbag

Not much sizzle in Atlantic Power these days Add to ...

Hi Lou,

I’m n regular reader of your column. You’ve analyzed Atlantic Power twice in the past.

Given the recent quarterly earnings and the news that they cut the dividend, and is trading at $6.00, can you give your thoughts on the stock and where it’s heading in the next 12 months?

I believe that it is undervalued right now as many investors dumped the stock when they heard about the dividend cut. But I believe that the book value should be higher than 6$? Am I correct, or am I missing the point here?

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Thanks,

Michael

Hey Michael,

Thanks for the assignment and your interest in the analysis that I conduct on behalf of investors.

It seems like you are on a bottom fishing expedition when it comes to the shares of Atlantic Power Corp. which have taken a pounding since the last time I examined the case on Dec. 21, 2012. I don’t focus on fundamental metrics when it comes to making investment decisions although I make it a habit of tracking revenue and earnings. From the research I have conducted on your behalf you are correct the BVPS is greater than the price of the stock. But as my old pal Peter Jahn always advised, “What don’t you get the stock is going down!”

In December the shares were trading for $11.40 and it was advised that investors had to be very careful approaching the stock. The shares had bounced off a 52-week low but it appeared that the buying was from an extremely oversold position. At the time I didn’t see ATP as a buy and as things turned out it was the right call.

Another run at the charts will help determine if you have a buying opportunity at these levels.

The three-year chart is the poster for one of those rides to hell you don’t ever want to be on. The MACD and the RSI both signalled that it was time to hit the silk in February of 2013 when ATP couldn’t get through resistance at $14.00. An investigation of the short term chart will add more depth to the analysis.

The six-month chart provides a close up of the current situation at ATP. The MACD and RSI seem to be turning higher as the shares move out of an extremely oversold situation. You could catch a ride but you have to focus on risk management. The company is expected to lose money for the next two quarters. First quarter 2013 is scheduled for release in May so make sure you are on it like a duck on a June Bug! You should also be aware that there are class action law suits circling the company which puts more chicken feathers on this sucker.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it to lschizas@globeandmail.com.

 

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