Profiting from Home Capital Group
[PostStockWidget_Extention stock_valuation="" pricetype="live" manual_date="Dec. 21, 2012, 2:04pm GMT" symbolcodes="'HCG'" symbolprices="59" div_align="right"]
Home Capital Group Inc. (Home Capital) is a holding company that operates primarily through its principal, federally regulated subsidiary, Home Trust Company (Home Trust), which offers insured deposits, residential and non-residential mortgage lending, consumer lending and payment card services. The Company operates in two segments: mortgage lending and consumer lending.
HCG is one of the top 10 Purple Chips on the TSX because of its history of smooth and predictable earnings. Now the shares are trading at a high valuation and we believe we have maximized the profit potential. HCG could trade as high as $64 but the risk of a correction increases as the valuation gets higher. We are signaling a HIGH VALUATION IN HOME CAPITAL GROUP AT $59.00 (HCG-T, $59.22).
We signaled a low valuation under $43 on May 25, 2012. Here is what the chart looked like at that time:
During the last 18 months the Purple Chips model also bought HCG when we identified a low valuation on August 19, 2011 under $46.50 and then signaled a high valuation at $53.50 on February 3, 2012. These transactions illustrate the benefit of using valuation levels to identify entry and exit points. Note, when we initiated this investment, the Purple Chips model originally had a high valuation target at $54.00 and due to the increase in Earnings Per Share (EPS) the target was raised to $59.00. Here is the chart today:
