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Superior Plus: In an inferior position Add to ...

Your thoughts on maintaining dividend and growth possibilities for Superior Plus? Thanks


Hi Laurie,

Thanks for the assignment. The charts for Superior Plus Corp. are the type that make you ask, "What's wrong with this picture?"

SPB has seen its cash flow hit by warmer weather that reduced sales in its energy services division and the economic environment has put downward pressure on its other operating units. In addition, over the last year the company has been busy chewing down on a number of acquisitions that are forecast to drive growth in 2011. Let's consult the charts and see in which direction it is heading.

The three-year chart depicts the sell off that began in January of this year. The downtrend line is still intact providing resistance to every advance.There is also resistance along the 50-day moving average which SPB needs to master if it wants to breakout. The stock caught a bounce off of support at $11.00 after the gap down that followed the release of Q2 results that clearly had investors in a selling mood.

The six-month chart tells the tale of woe that has been the story of SPB for most of this year. The MACD provided a sell signal ahead of the August 5, 2010 release of the Q2 report. It began to bend down in late July and breached the signal line a few days before the fall.

At this point, the case for a return to an uptrend is quite mute. As far as the sanctity of the dividend is concerned, I would say that at 13.5 per cent, as of this post, it is very rich and has to be a point of discussion at the board level.

Companies need cash to grow and to keep their lenders happy. SPB needs a good cold snap this fall and winter to drive demand for its propane and fuel oil business, and it needs to see strengthening in the general economy to drive demand into its other operations.

I would say that you are asking a lot from SPB and that the downtrend is in place and no trend reversal has emerged.

Happy Capitalism!

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