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Steve Auger
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Steve Auger has been trading stocks, commodities and options for over 25 years and runs the website http://www.stockmarketstudent.com. After graduating from the University of Waterloo in 1981 with a Bachelor of Applied Science, he has been employed most of his career working on space and... More
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  • High Equity Multiplier Identifies Volatile Oil And Gas Plays

    The Equity Multiplier is a term established almost 100 years ago as one of the factors used in Dupont Analysis. The equity multiplier is a measurement of a company's financial leverage, defined as the ratio of a company's total assets to its shareholder's equity. A high equity multiplier is essentially a debt ratio, indicating that a larger portion of asset financing is being done through debt. The Equity Multiplier also flags threats a company may face from economic conditions affecting the debt-equity mix, such as falling oil price.

    Upon examination of highest Equity Multiplier companies in the Oil & Gas sector, two stocks were found on the verge of technical breakdown, both breaking through resistance levels today, and both falling within descending channels.

    Price Chart for Targa Resources

    The first company (see chart above) is Targa Resources Corp (NYSE:TRGP). Assuming a continuation of falling energy prices Targa will likely continue to follow suit as it broke through the support level today. The more unlikely situation (but also a possibility) is a rebound here with a double bottom formation.

    Teekay Corp (NYSE:<a href='http://seekingalpha.com/symbol/tk' title='Teekay Corporation'>TK</a>)

    Teekay Corp is the second company breaking through a support level today. Like Targa, there is a possibility of a double bottom, but will probably continue lower from here.

    Interestingly enough, Teekay has a subsidiary in the tanker business, also with a high Equity Multiplier, and over the last few days has literally been taking off.

    Teekay Tankers Ltd (NYSE:<a href='http://seekingalpha.com/symbol/tnk' title='Teekay Tankers Ltd'>TNK</a>)

    An interesting play would be to go long Teekay Tankers (TNK) on a pullback to under $5, and simultaneously short Teekay Corp (TK).

    Assuming a continuation of falling oil prices which is likely given the current global economics, this long/short position may end up being very profitable.

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Jan 12 11:23 PM | Link | Comment!
  • Portfolio123 Ranking System Optimizert Tutorial

    A number of Portfolio123 members have been asking for a tutorial on the stock ranking system optimizer since it became available almost one year ago. P123 staff have been silent about its use ever since. Recently I became curious about it and decided to explore the feature to see how (or if) I could make use of it.

    Read full article

    Oct 30 9:14 PM | Link | Comment!
  • Test Environment

    I've changed my plan a little bit from what I described in yesterday's post. I realized that no I'm not Superman and I can't afford to spend several months on this project. In other words, a few simplifications were in order.(click to enlarge)

    First of all, I decided not to test every sector for every factor. Instead I will test the entire target universe for all 107 factors, then afterwards determine if individual sectors are covered by the stock factors. If not, then I will further test those sectors.

    In addition, I won't be testing for rising/falling interest rates at this stage but instead I will do so during RS optimization. A separate project will be initiated to discover what factors work best in various economic conditions.

    More

    Oct 28 11:21 PM | Link | Comment!
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