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Pacific & Western Bank of Canada has been selling off since 2013
schizas’ mailbag
Lou Schizas
Special to The Globe and Mail

This article was published more than 8 years ago. Some information may no longer be current.

Hello Lou,

I'm an active investor (TSX and NYSE) and invite your thoughts regarding PWB on Toronto.

It has been a real dog in my portfolio. Comments?

Thanks,

Steve

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Hey Steve,

Thanks for the assignment. This will be my first run at that charts for Pacific Western Bank of Canada (PWB TSX). The company operates as a branchless bank which raises deposits through brokers. The average daily volume over the last three months is 3,775 shares and the market cap is only$87.47 million. In addition the common shares do not pay a dividend. What this tells me is that PWB has to be included in the speculative part of any portfolio.

A study of the the charts will inform my comments on this investment.

Desktop users click on image to enlarge

The three-year chart depicts a stock that has been labouring under a downtrend line since October of 2013. The choppy trading pattern speaks to the the low average trading volume and points to there being days the shares don't trade at all. The breach of support near $5.50 in June of 2015 sent PWB to its 52-week low of $4.40 in mid September. Worth Mentioning is the death cross that formed in early June just ahead of the breach of support.

Desktop users click on image to enlarge

The six-month chart is not providing any evidence that we can expect a trend reversal in the near term. I think at this point you would want to review your investment thesis with regards to this investment. The Canadian banking industry is dominated by the oligopoly of the big five players that suck all the oxygen out of the space.

PWB is a microcap player that doesn't pay a dividend, is a thin and choppy trader, and depends on a broker network to feed its deposit base. These factors do not make the stock a screaming buy. I do recognize the rationale of going with a branchless model but at this point it doesn't seems to be driving the stock higher. You might want to consider a tax loss sale as we approach the end of the year.

Next time I will analyze the charts for Copper Mountain Mining Corp. (CUM TSX) for Toma.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it to lou@happycapitalism.com.