1. In buying and selling stocks how much weight one should place on technical analysis ?
With respect to BAM, a broker's technical analysis section indicated, on March 7/2025, that this security could drop to a range of 50-54. The event on March 7/2025 was described as "Megaphone Top".
2. Is there any explanation as to why BAM dropped 23% from its peak while the TSX dropped only 7% as of today ? Do you recommend adding at this level or holding ?
I will appreciate as always your insight.
We find that a combination of technical and fundamental analysis is crucial to gaining an overall picture of a stock. Although, while technical analysis can be helpful for entering and exiting a stock, we find that other factors like: valuation, industry backdrop, and forward growth prospects are more important than the technicals. BAM could be in a megaphone pattern, or even a falling wedge, but it is down 33% from its highs, and it trades at a decent valuation of 29X forward earnings.
Individual names, on average, will trade with more volatility than the broader market, as the TSX is being held up by utilities and gold stocks this year, but Brookfield has seen these declines before and has experienced and navigated recessions in the past.
While the name could drop further, we would be comfortable slowly adding here, given its decline, and high-quality business. Things can get worse before they get better, but over the next year, two, or more, we feel that investors will be glad they bought high-quality names at a discount.