Part 1

Brookfield Renewable Corporation

Company background

Brookfield Renewable Partners operates one of the world’s largest publicly-traded renewable power platforms. Its portfolio consists of approximately 20,000 MW of capacity and over 5,300 generating facilities in North America, South America, Europe and Asia. Its investment objective is to deliver long-term annualized total returns of 12%–15%, including annual distribution increases of 5–9% from organic cash flow growth and project development. It has an established track record of creating value by prudently acquiring, building and financing assets, and actively managing its operations.

The company is a global leader in hydroelectric power, which comprises approximately 66% of its portfolio. It is also an experienced global owner and operator of, and investor in, wind, solar, distributed generation, and storage facilities.

Brookfield Renewable Corporation (NYSE: BEPC; TSX: BEPC) is a Canadian corporation, created to provide investors with greater flexibility in how they access BEP’s globally diversified portfolio of high-quality renewable power assets. Class A shares of BEPC are structured to provide an economic return equivalent to BEP units though a traditional corporate structure. Each BEPC Class A share has same distribution as a BEP unit, and is exchangeable, at the shareholders option, for one BEP unit.

Current Position – Financial Performance and Future Growth Prospects

The company is a great and indeed rare combination of a solid dividend player and a powerful growth machine. Brookfield Renewable Corporation has managed to increase its distribution by a compound annual growth rate (CAGR) of 6% over the last 20 years. Furthermore, the company has delivered an annualized average total return of 18% since 2000. This in turn represents three times higher return than what the S&P 500 generated over the same period. Part of that total return was due to its distributions, but most of it stemmed from share price appreciation. Brookfield Renewable expects to provide total returns over the long run of around 15%.

We see BEPC as a long-term winner from the expected alternative energy boom that we are going to see in the coming years. This is the main reason why we believe that the company’s growth prospects are rock solid. Renewable energy isn’t just a new fancy concept that will be with us for couple years and then go away. On the contrary it is a defining pillar of success for building a better future. Thus, there is no doubt in our minds that all of the company’s products and services are destined to enjoy even greater adoption in the future. Countries around the world have committed to reducing carbon emissions over the next few decades. With the inauguration of President-elect Joe Biden the US has restored its leading position as a member of the Paris Climate Agreement and has once again made carbon reduction in the U.S. a top priority. These efforts make renewable energy production a must-have.

Another key growth driver for the renewable energy space that makes it even more attractive is that it’s cost-effective. Solar and wind power is now the cheapest source of bulk energy generation.

Brookfield Renewable sees generally favorable business environment, momentum and sentiment as the ESG space continues to grow rapidly on an annual basis. The company has a current capacity bottleneck at around 19 gigawatts. However, Brookfield has never stopped investing in its own success and as a result the company has another 18 gigawatts of capacity in its development pipeline. The primary focus for BPEC so far has been solar power, which we believe is a very smart way to play the development of favorable economic and business trends in the ESG space. Throughout the last 5 years we have seen a massive decline in photovoltaic (PV) energy production, solar has become a massive pipeline for BEP and its investments are at high yields. We see a potential for a compound annual growth rate of around 10% for the foreseeable future and, surprisingly, shares can be purchased for a reasonable price.

Technical Analysis

By looking at the daily chart, we can see the strong bullish rally that has occurred in the last 3 months taking the price from the October 26th lows of around $42 to the $63 all-time highs registered in the beginning of February. Throughout this most recent strong 50% rise of the stock we have observed a consistent weakening of the bullish momentum, clearly portrayed by the lower highs put in by the RSI, thus creating a strong daily divergence between the price and RSI charts. This could have easily been taken as an important warning sign at the time for the bulls, showing them that a potential downturn or reversal could be just around the corner.

The technical picture on the daily chart for the BPEC shows that the stock has already corrected quite substantially after over-extending itself to the upside earlier in January. The stock is currently trading at $50 per share, which is exactly 20% below its all-time highs.

We will start buying BPEC at $50, just above the major support at $49 where lots of buying pressure is expected. In case the price breaks the support and drops further, we will be interested in adding more to our buy positions at the next strong support at $43-45. Our first take profit target is at $70, followed by the next target at $85 where we will be fully closing our positions and collecting the profits.

The upward sloping diagonal uptrend resistance capped the most recent rally in the beginning of January when the stock was rejected around the $63.47 all-time highs. Ever since then, the stock has been on a steady and continuous decline for over a month now. We give a large percentage of that movement to heavy profit taking interest as well as to the broad-based uncertainty in the markets.

The price is now trying to find support and buying interest at the 100 DMA, which also sits at around $50/share. This is a critical moment for the uptrend of BEPC, as if the above-mentioned strong support zone is broken, then we are probably going to see a larger decline towards the $42-45 area. Additionally, we must point out that the most recent 20% corrective movement of the stock ended up breaking the upward sloping diagonal trendline support at around $53.50/share. Thus, now this level will act as an interim resistance for any future rallies and only a clear break above it would signal the resumption of the uptrend.

However, we are firm believers in the long-term success of Brookfield Renewable Corporation, thus our long term investment plan for this stock will be to apply the accumulation approach and buy more from the stock on any dip. The current price around $50/share is a good place to start as you are getting a 20% discount from the all-time highs. In case, the stock moves lower later in the month of February, then you should look to add more to your position anywhere between $42-45/share, thus improving your average cost basis of the trade.

Lowe’s Companies (LOW)

Company background

With over 2,200 home improvement and hardware stores, 300,000 associates globally and over 18 million customers served each week Lowe’s has evolved as one of the world’s leading home improvement giants, offering services to homeowners, renters and commercial business customers.

The company strives to provide its customers with everything they need to get their home improvement project done right – from home maintenance and repairs to remodeling and decorating.

One of the things that characterizes Lowe’s is that the company has always striven to put the customer first in everything they do. From their extensive selection of products to their team of home improvement experts, Lowe’s works hard to deliver the best service and value to its communities.

The company was originally founded back in 1921, when L.S. Lowe founded Lowe’s North Wilkesboro Hardware. In addition to hardware and building materials, the store sold sewing notions, dry goods, horse tack, snuff produce and groceries. This year will be a special year for the company as the brand will be celebrating its 100th birthday, and we believe that the business model, execution and management of the company have never been stronger.

Current position – Financial performance and Future Growth prospects

Lowe’s stock has seen a very positive overall sentiment and upward momentum throughout the last 8-10 months as a result of the fact that the company has experienced larger than usual volumes across all of its stores. As we know, the COVID-19 pandemic forced people to stay at home for the most part of 2020, which in turn gave everybody the opportunity to catch up with all of the renovation and home improvement projects that they had been postponing for years. The stock has outperformed the general Building Products – Retail industry quite substantially. Additionally, the company has also provided an optimistic view for its upcoming 2020 Q4 earnings report on February 24th as well as for their overall fiscal 2020 performance, which has definitely served as a positive catalyst for the stock. Some of the key metrics to be watched in the upcoming report are going to be revenues and comparable same store sales, which are expected to rise with 22% and 23% respectively.

The senior management of the company has done a very good job navigating these crazy times from a business standpoint by focusing a lot of efforts on widening the portfolio of products and generally improving the company’s omni-channel capabilities. One of Lowe’s newest strategies was branded as the “Total Home” strategy as it aims to provide everything that homeowners need for renovation and remodeling work in every area of the house. The strategy is likely to benefit both business and DIY (do-it-yourself) customers. However, higher operating expenses related to the pandemic and expansion of supply chain infrastructures is likely to put pressure on the company’s fourth-quarter performance. Also, sales growth in the fourth quarter is expected to moderate sequentially. Furthermore, the narrative around Lowe’s has been so positive for over 10 months now, that the general expectations among investors and analysts regarding the company’s business and financial performance have risen to very high levels, which makes it respectively that much harder for the company to keep up with some of these expectations. A potential miss on either the top or bottom lines in the upcoming Q4 Earnings report at the end of February will be a great opportunity for investors to buy into the stock at a good discount.

Another important growth driver for Lowe’s has been its strong digital presence. If we look at the percentage increase in the company’s online business volumes we will see that sales at lowes.com increased 106% in fiscal third quarter, following increases of 135% and 80% during the second and first quarters, respectively. Furthermore, online penetration was 7% of total sales throughout the last quarter. With the recent cloud-related upgrade that the company made to its official website lowes.com customers are now able to enjoy a much better and more enhanced online shopping experience with newly added features such as online delivery scheduling. Additionally, the company has been working to accelerate capabilities such as order tracking as well as search and navigation features. One of the most innovative business decisions that Lowe’s has made is to install Buy Online Pickup in Store self-service lockers across all U.S. stores by the end of March 2021, which

Technical Analysis

By looking at the daily chart, we can see the strong bullish rally that has occurred in the last 3 months taking the price from the November 18th lows of around $147 back to the all-time highs sitting at $180 per share in the beginning of February. We could split this strong more than 22% rise of the stock into two parts mainly divided by the difference in the general strength of the underlying bullish momentum. While we saw a strong and continuous growth in the bullish momentum throughout the December-January period, we have observed a relatively strong reversal of that momentum in the last few weeks. This has been clearly portrayed by the lower highs put in by the daily RSI, thus creating a strong daily divergence between the price and RSI charts. This could easily be taken as an important warning sign for the bulls, showing them that a potential downturn or reversal could be just around the corner. The stock has managed to re-test its all-time highs originally set back in October, 2020 but as it seems from a purely technical standpoint LOW might not have enough power to push through the $180 all-time highs. With that being said, a strong and better-than-expected Q4 earnings report on February 24th combined with a strong company guidance for 2021 could act as the fundamental catalyst that the company needs to break higher. However, we need to keep in mind that stocks trading near theyr all-time highs on a relatively lower volume with a fading bullish momentum could be very dangerous short-term plays for the bulls. We are currently seeing a potential double-top bearish reversal pattern forming on the Weekly chart right at the $180 mark, which in turn has acted as a multi-year horizontal resistance for the stock. The combination of the excessive over 200% 10-month rally, the technical patterns and the upcoming earnings report might be signaling that the stock needs somewhat of a sideways consolidation pattern with a slightly downward bias, before it resumes its strong long-term bull trend.

We will start buying LOW at $165, just above the major support at $164 where lots of buying pressure is expected. In case the price breaks the support and drops further, we will be interested in adding more to our buy positions at the next strong support at $145-150. Our first take profit target is at $207, followed by the next target at $225 where we will be fully closing our positions and collecting the profits.

The stock is currently trading at around $178 per share with a clear loss of the previous strong upward momentum. The most important price level for the stock at the moment lies at $165, where we can see 3 very strong support lines overlapping with one another. The diagonal upward sloping support line at $170, overlaps with both the 50 DMA and 100 DMA, which currently lie at the $165 mark. The next strong support zone on the daily chart is around the $149 mark where we can see another strong horizontal support, which is expected to provide a lot of buying interest.

However, we are firm believers in the long-term growth prospects for Lowe’s, thus our long term investment plan for this stock will be to apply the accumulation approach and buy more from the stock on any dip towards the above-mentioned support zones. The current price around $178/share is not recommended as a good entry point for any Long positions, simply because it is never a good idea to chase stocks higher. Even the best stock could prove to be an under performer if you end up paying too much for it! With respect to the company’s business position at the moment and the upcoming earnings report, we would prefer to wait for a more meaningful pullback before we initiate our Long positions. A good place to start accumulating shares in Lowe’s would be around the $165 mark. In case, the stock moves lower throughout Q1 then you should look to add more to your position anywhere between $145-150/share, thus improving your average cost basis of the trade. Our targets to the upside will be placed at $207 and $225 per share respectively.

Sincerely,

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