On our February 17, 2016 Canadian Dividend Watch List we listed quite a few companies. This is a review of standout performers and what investors might want to look for going forward. The first company we’ll highlight is Ag Growth International (AFN.TO). At the time of the watch list, AFN.TO was trading at CAN$26.64. After just short of one year, the stock price for AFN.TO has doubled. Below we have set downside targets and take a look at the Altimeter to determine the best points to buy and sell.
Based on the work of Edson Gould, we have determined the downside targets to watch for.
On the surface, AFN.TO has managed to achieve the first downside target of CAN$54.06. However, as seen in September, October and November 2016, falling to this level is not a clear indication that the run on the upside is over. What we can say is that any substantial decline to the downside would be our best indication of a change in the trend. We are mindful of the December 8, 2016 peak which had a large decline but was later bested on January 26, 2017. This could be the Dow Theory Double Top, indicating a reversal of the prior trend is in play as the most recent peak did not exceed the December 2016 top by much.
Gould’s Speed Resistance Lines (SRL) indicate that the next downside target (mid range) is CAN$36.65. Because the extreme downside target is CAN$19.23, we could only settle on the more realistic CAN$27.94 until the price gets within a reasonable range on the downside. All indications are that for an investor to have obtained +100% gains in one year, the only course of action is to sell the principal as the gains so far have exceeded the historical average by more than 10 times.
Now, let’s look at the big picture for Ag Growth International (AFN.TO) to see where we are on a relative basis. Below is Edson Gould’s Altimeter which reflects the relative value of a stock based on the dividend payment.
From what we can tell, there is a distinct pattern. These patterns do not need to repeat, however, they can be valuable when they act as a guide. At least since 2006, whenever AFN.TO traded at these levels in the past, the stock has gravitated toward lower levels. Again, patterns and rules are meant to be broken eventually. So far, our best guess is that AFN.TO is a sell and should be reconsidered with reckless abandon at or near the 160 level on the Altimeter.
Keep in mind that the Altimeter and SRL levels above adjust for value accretion over time. Therefore, six months from now there will be new levels to watch. If interested, let us know and we’ll run the numbers again.