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On Tuesday, U.S. market action was negative as sellers outnumbered buyers. The Dow Jones Industrial Average declined 1.14 per cent, the S&P 500 index lost 1.24 per cent, while the Nasdaq composite index fell 1.83 per cent. There appears to be growing skepticism surrounding the timing of president Donald Trump's election promises aimed at stimulating the economy.
In Canada, the S&P/TSX composite index retreated 129 points, or 0.84 per cent. There were 71 securities in the TSX Index that advanced, 174 securities declined in value, and six stocks closed the day unchanged.
The TSX Index is up just 0.17 per cent year-to-date.
On today's TSX Breakouts report, there are only 12 stocks on the positive breakouts list (stocks with positive price momentum), and 63 stocks are on the negative breakouts list (stocks with negative price momentum), of which, nearly half the companies are energy stocks. The price of oil plunged 1.8 per cent on Tuesday and continues to slide lower today.
Featured today is a security that may appear on the positive breakouts list in the near-future, especially if investors flock into safe haven securities. The share price recently experienced a bullish 'golden cross' technical pattern. Also positive is the increase in insider buying action with several insiders recently scooping up shares. The company I am referred to is Barrick Gold Corp. (ABX-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Barrick Gold is a senior gold producer with operations across the globe. The majority of the company's gold production, over 75 per cent, comes from the Americas region. Barrick has nine producing gold mines, which are located in Argentina, Australia, Canada, the Dominican Republic, the United States, and a 47.5 per cent interest in a mine in Papau New Guinea. The company also has a copper mine in Zambia, and 50 per cent interests in copper mines located in Chine as well as Saudi Arabia.
On a special conference call held on Feb. 22, Robert Krcmarov, the executive vice-president of exploration and growth, highlighted the company's core objectives, stating, "First and foremost, we're driven by delivering shareholder value. When we think of growth, we think in terms of cash flow per share. Our portfolio of mines is superior, and we have a deep project pipeline with superior optionality and a portfolio that, again, could capitalize on multiple commodity price cycles. We've got a demonstrated track record of delivering value through exploration, and we have a robust exploration investment strategy that spans the spectrum of near-term to long-term value generation."
The company will be reporting its first quarter 2017 financial results before the market opens on April 25.
The company trades on both the Toronto Stock Exchange and the New York Stock Exchange under the same ticker, ABX.
Dividend policy
The company pays its shareholders a quarterly dividend of 3 cents (U.S.) per share, or 12 cents (U.S.) per share on a yearly basis. This equates to an annualized dividend yield of approximately 0.6 per cent.
Last month, the company announced a 50 per cent dividend increase, raising it to 3 cents (U.S.) per share from 2 cents (U.S.) per share. In a press release, management stated, "Since the end of 2014, we have reduced our total debt by 40 percent, and in 2017, we are increasing our investments in exploration and projects that have the potential to grow free cash flow per share over the long term. Reflecting this progress, we are increasing returns to our owners through an increase in our quarterly dividend."
Analysts' recommendations
Analysts' outlooks vary widely. According to Bloomberg, 28 firm have issued research reports on the company since December, of which 12 analysts have "buy" recommendations, 13 analysts have "hold" recommendations, and three analysts have "sell" recommendations.
Revised recommendations
Many analysts have been lifting their target prices.
This month, Stephen Walker, the analyst from RBC Capital Markets, increased his target price by $4 to $23 (U.S.). In addition, Matthew Korn, the analyst from Barclays, increased his target price to $22 (U.S.) from $20 (U.S.).
In February, Tanya Jakusconek, the analyst from Scotia Capital, increase her target price to $22 (U.S.) from $19. Andrew Kaip, the analyst from BMO Capital Markets, increased his target price to $22 (U.S.) from $20. Anita Soni from Credit Suisse increase her target price to $25 (U.S.) from $23, and Barry Allan, the analyst from Mackie Research Capital, increased his target price to $22.50 (Canadian) from $21.
Financial forecasts
Analysts are forecasting steady earnings growth. Earnings estimates are denominated in U.S. dollars. The Street is forecasting earnings per share (EPS) of 86 cents in 2017, up from 70 cents in 2016, with EPS anticipated to rise to 90 cents in 2018.
Financial expectations have been revised higher in recent months. For instance, two months ago, the consensus EPS estimates were 82 cents for 2017 and 82 cents for 2018 as well.
Valuation
The stock is commonly valued on a price-to-net asset value (NAV) basis. Target prices can vary widely depending on assumptions in the NAV calculation and the multiple applied to the NAV.
Target prices range for Barrick range from a low of $15 U.S., which equates to approximately $20 Cdn., to a high of $38.50 Cdn.
The average one-year target price is $27.65 (Cdn), which implies the share price may increase 6 per cent over the next 12 months.
Insider transaction activity
On March 16, the chairman of the board of directors, John Thornton, purchased 210,450 shares, and on March 1, Mark Hill, the chief investment officer, purchased 9,453 shares at a price of $24.58 per share.
Chart watch
Year to date, the share price is up 21 per cent.
This month, the stock price experienced a bullish 'golden cross' pattern, where the 50-day moving average crossed above the 200-day moving average. The share price has initial overhead resistance around $27, and after that, around $30.
Should the share price pullback, there is downside support around $24, close to its 50-day moving average (at $24.39) as well as its 200-day moving average (at $23.95). Failing that, there is strong support around $20.
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The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company's dividend policy, analysts' recommendations, and provides a brief technical analysis for a security to provide readers with more information.
If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.
Securities screened are from the S&P/TSX composite index, the S&P/TSX Small Cap index, as well as Canadian small cap stocks outside of these indexes that have a minimum market capitalization of $200-million.
A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.
Editor's note: An earlier version of this column contained a quote incorrectly attributed to Barrick's management. This version has been updated.