This post like other chart analyses in this blog, is part of a self-imposed quest to assess whether Technical Analysis in my hands is helpful in evaluating stocks in which I may or may not have a personal position. I do not own AACo shares at present. A friend suggested this review for a technical viewpoint.
The opinions are my own, and do not take into account fundamental data, or other considerations of importance in making investment decisions. Such advice taking into account your personal circumstances should be sought elsewhere.
Australian Agricultural Company is a world leading beef producer, with more than 600,000 cattle, 19 cattle stations, two feedlots, and three farms on 7.2 million hectares in Queensland and the Northern Territory.
Think of AACo and one tends to think of Peter Holmes a Court. His famous father Robert died unexpectedly September 2 1990. At one time Robert was Australia’s richest man, but he died intestate, leaving only the asset rich family company Heytesbury Pty Limited which passed one-third to his wife Janet, and two-thirds to the four children.
Peter’s theatre production company in the USA was in financial difficulties and was sold. He returned from New York to live in Sydney becoming CEO of AACo after receiving an estimated A$35 million from his share of the Heytesbury Estate, in 2000.
He is credited with re-listing AACo of which Futuris was the largest shareholder, and was the CEO until 2004 when the company shifted its headquarters to Brisbane. He decided to stand down rather than re-locate his family to Brisbane. Don Mackay a cattleman from Dubbo replaced him.
Some of his decisions were criticized as were the company strategy, and its failure to become as profitable as hoped. In his time at the helm, the share-price was static, with a high of about $1.30.
Origin of the company
Some of this land was later exchanged for more suitable land near Sydney; sheep and shorthorn bulls were imported from England. In the twentieth century the company embarked on a move north. Land in the South was subdivided for acquisitions in Queensland and later in the Northern Territory.
In many years droughts, depressions, and stock losses have reduced the company profit. Recently droughts have again been a problem, whilst a new hazard arose in 2011 when the government suspended the live cattle trade to Indonesia. Although now restored, Indonesia is now less reliant on Australian beef, after developing their own herds.
Long Term Analysis from the Monthly chart.
Observations from the Monthly chart:
- Along with most other stocks, the share-price of Australian Agricultural Bank was severely affected by the global financial crisis.
- From a high of $3.60 in late 2007, the share price plummeted to a low of $1.15 in March 2009.
- In the last 4 years the share-price has been static, trading sideways in a range between $1.15 and $1.70.
- In the past year, the share price has traded in the lower part of this range, with firm support at about $1.10. This appearance is suggestive of institutional accumulation of stock.
- $1.10 is a long-term support level from 2003/4
Medium Term Analysis from the Weekly chart
- This is a chart showing the price action over the last three years.
- It show a double top formation at $1.70, and a decline to a low of $1.03 in June of 2012
- Since then there have been two strong rallies in the share price which have stalled at $1.36 resistance ( the half-way mark)
- In the past six weeks another impulsive move higher again stalled but this time at only $1.25 (the 38.2% Fibonacci level).
Short Term Analysis of the Daily chart in the past 12 months
- This chart shows in greater detail the retracement after the second of the two rallies met resistance at $1.36
- The most recent price action has been an impulsive move higher from support at $1.08 to a high of $1.285, before flattening into a trading range supported at about $1.20.
- However in the last week the share-price fell through support to $1.15 which represents the 61.8% Fibonacci level.
Australian Agricultural Company surprisingly given its immense property assets, and its world ranking as a well-managed agribusiness utilizing scientifically based best practice standards, has a share-price languishing close to its historic lows.
Recent rallies higher since the GFC have stalled initially at $1.70 and more recently at about $1.25.
A break-out above $1.25 would most likely start a strong impulsive move higher for the share-price.
As a very broad generalization, the longer the duration of the range trading, the greater the strength the upward move is likely to be
with about 1:1 ratio between time and upward price movement.
I would set a target price of $2.40 which happens to also be the 50% retracement level, on the basis of the current trading range; and in a longer term a price target of $3.60 based on the 4 year trading range (the 100% retracement level)
On might wonder where the stimulus for higher prices would come from. Given past international interest in our agribusinesses, it may well come from overseas.
The technical trigger for entry is above $1.25, but with little downside likely, entry at current prices is not unreasonable. The next resistance hurdles to meet are at $1.36 and then at $1.70. Break-out above this would probably generate further impulsive move higher to $2.40.
A possible stop/loss position would be $1.
It is stocks such as AACCo that have shown little or no recovery since the GFC that are probably the reason the Australian market indices have struggled to break above the half-way mark.
- Industry shocked by Farley’s departure from AACo (abc.net.au)
- Managing Director of Australian Agricultural Company David Farley Features in The CEO Magazine (virtual-strategy.com)
- CEFC, NAB beef up their solar investments with AACo PV project (reneweconomy.com.au)
- Feed and water concerns as cattle hit the road (abc.net.au)
- Cowpacity (esriaustralia.wordpress.com)
- Stocks to watch on Thursday (news.smh.com.au)
- The Chinese investment elephant in the room (thebricspost.com)
- Australia Agribusiness Report (marketandresearch.wordpress.com)
- Cattle company CEO steps down (bigpondnews.com)