close icon

Home Capital: From near Bankruptcy to Opportunity

Home Capital Survived in 2017

Home Capital investors had a volatile two years. The company almost went bankrupt in mid-2017. Allegations from the Ontario Securities Commission that management misled investors about mortgage fraud within its broker network led to a run on the bank. 95% of its saving accounts deposits disappeared as a result. On May 8th, 2017, HCG fell to as low as C$5.06 in Toronto.

Fortunately, a subsidiary of Warren Buffett’s Berkshire Hathaway stepped in to provide a C$2 billion credit line, preventing a liquidity crunch. Berkshire also acquired 20% of Home Capital’s common stock with the intention to acquire another 20%. This vote of confidence from the world’s greatest investor led the stock price to C$20.75 in June 2017.

However, Buffett was denied the additional 20% by the rest of the company’s shareholders and last month decided to “substantially exit” the investment in the Canadian mortgage lender.

A Bullish Elliott Wave Setup

The stock has been hovering between C$18.60 and C$12.50 since June 2017. While the company’s fundamentals have significantly improved, the market is yet to acknowledge that fact. In order to see if that is going to happen soon, we need to take a look at the situation though the prism of the Elliott Wave Principle.

Home Capital stock Elliott Wave forecast

The 4-hour chart of HCG stock shows that the sideways movement from C$20.75 to C$12.48 looks like a simple A-B-C zigzag with a triangle in wave B. This means the preceding rally from C$5.06 is a motive wave, marked 1.

If this count is correct, the 5-3 wave cycle is complete and Home Capital stock can be expected to accelerate to the upside in wave (iii) of 3 from now on.

The support line drawn through the last two lows managed to discourage the bears for the third time in December, further strengthening the bullish outlook. Home Capital seems to be in a position to reward investors in 2019 and beyond.

Did you like this analysis? Our Elliott Wave Video Course can teach you how to uncover similar opportunities yourself!

Disclosure: The author holds a long position in HCG stock.

Stay informed with our newsletter

Latest Elliott Wave analysis on different topics delivered to you weekly.

Privacy policy
You may also like:

Etsy Stock: The Easy Money’s Been Made Already

Three years ago, in January 2016, Etsy stock fell to as low as $6.04 a share. Yesterday, it closed at $54.59 a share. If you have been among the lucky few, who happened to pick the bottom and held until now, your annual compounded rate of return would be over 108% per year or 803%…

Read More »

Bank of America Riding the Earnings Wave… For Now.

The last time we wrote about Bank of America was on October 18th, 2018. The stock was trading below $29 a share, down from the $33.05 top reached in March. The bank had just reported a record first quarter, but the stock price was falling nevertheless. So in order to make sense of it, we…

Read More »

Boeing Stock Ready for a Final Ascent

The last time we wrote about Boeing stock was in early October 2018. In that article we shared our view that while BA was approaching the $400 a share mark, it was time for the bulls to play it safe. The Elliott Wave principle suggested that a bearish reversal can soon be expected, even if…

Read More »

Nvidia Stock Staging a Deceptive Elliott Wave Recovery

The last three months of 2018 may have been bad for stock market investors in general, but few suffered more than NVDA shareholders. Nvidia stock climbed to an all-time high of $292.76 a share on October 2nd. By December 24th it was down to $124.50, losing over 57% in less than 90 days. So it…

Read More »

General Mills Stock Staging an Elliott Wave Recovery

If you think the last three months have been bad for stock market investors, think about how General Mills stock investors must be feeling. GIS has been steadily declining since mid-2016. Two and a half years ago, the share price climbed to an all-time high of $72.95. Last week it fell to $36.42, so it…

Read More »

A Special Letter about the State of the Stock Market

Dear Fellow Elliotticians Most major stock markets have been in a bull market for almost a decade. Unfortunately, after last week’s selloff it is now evident that this bull market is over. The S&P 500 is down 17.8% from its all-time high reached three months ago, despite a still strong economy and relatively low interest…

Read More »

Moody’s Stock to Give Investors a Chance to Evacuate

The stock market at large is crashing and even stocks owned by superinvestors like Warren Buffett are not immune to sharp selloffs. One such stock is Moody’s. As of September 30th, Berkshire Hathaway owns approximately 24 670 000 Moody’s shares, making it the 8th largest position in the portfolio. Moody’s reached an all-time high of…

Read More »

More analyses