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Schizas’ Mailbag

Stay off the SMART Technologies ride Add to ...

Hi Lou,

First, really enjoy listening to you on Talk Radio AM640.

Do you think SMA has been oversold and ready for a comeback? I’m also weary of its upside potential given the eventual competition from iPad/tablets.

Thanks,

D

Hey D,

Smart Technologies Inc. (SMA-T) is a company I was familiar with from my days in Calgary. At the time they were a private company which had success selling their integrated whiteboards into classrooms and boardrooms around the world. The systems that have evolved since the early 90s are quite impressive from a technology perspective, but the business has run into a soft patch in their core education market.

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You don’t have to be very smart to realize that governments from every corner of the globe are struggling with the consequences of having strapped on too much debt. The current view is that education spending by governments will be quite weak through 2013 and that translates into reduced revenue for vendors into that space.

A review of the charts will help you decide on how best to proceed with this investment.

The three-year chart clearly indicates that buying the shares of SMA at the initial public offering price of $17.00 was a painful choice.

But it does make the Facebook IPO look like a resounding success. This is one ugly chart and I can only imagine the angst that it generates for investors who have gotten on this ride anytime over the last 24 months.

From the chart we can see that there is an established downtrend and every effort to move higher has been met with resistance along the 50-day moving average. Lower highs and lower lows are not what profits are made of.

The six-month chart does confirm that the shares of SMA were oversold for most of March through May 2012. There has been some buying that came in off the 52 week low of $1.04 on June 6, which provided a tidy gain for investors brave enough to jump in. I would not consider myself part of the few and the brave.

As we came into June both the MACD and the RSI signalled that there was a trade setting up. However they are now flattening out and the advance has met resistance at $1.75.

Given all the challenges facing SMA, I would advise staying off of this ride.

Make it a profitable day and happy capitalism!

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

Visit his website

 
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