Trade TIH for revenue

Jan 29th, 2010 – Comment

If you are going to take a position in Toromont be prepared to trade this one. The advance hasn’t been without pull backs so try to take advantage of opportunties to enhance your returns.


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Toromont
Lou
I have been considering investing in Toromont Ind. now that they have acquired Enerflex.
Just wondering what your take on them is? Do you thing they are overvalued?
Thanks for listening
Ken
Hi Ken,
Toromont Industries Ltd. ( TIH TSX) operates two business units. The Equipment Group which manages the sales and rentals of Caterpillar gear and the Compression Group that sells equipment into the natural gas sector and specialized refrigeration sectors. The stock has recovered from the lows but is facing some resistance against $28.00.

TIH

The three year chart provides a view of the resistance that has given the stock a pause from the advance from the October 2009 lows at $23.00. The May to October period of 2009 provides a classic view of a stock trading in a down channel. Once it broke above resistance in October it moved quickly to $28.00.

 

 

 

TIH2

The six month chart offers a good view of the current trading action. The MACD signalled the pull back from $28 in early January and isn’t providing an indication of a trend reversal. TIH is testing support on its 50 day moving average which you want it to hold and catch a bounce. The last candlestick on the chart is a doji which indicates that there is a indecision playing out as to the direction of the stock.

As you mentioned TIH has just closed the takeover of Enerflex which will increase their footprint in the natural gas compression and processing sector. The move is strong endorsement of managements skill at taking advantage of opportunities in a down market. The deal is anticipated to immediately contribute to the bottom line.

The most recent quarterly report released on October 26, 2009 showed revenue down 26% and earnings per share off 12%. The nine month results were much better with revenue down 9% and earnings per share down 1%. Clearly TIH didn’t escape the economic slowdown but management was able to make the most of a bad situation.

If you are going to take a position in Toromont be prepared to trade this one. The advance hasn’t been without pull backs so try to take advantage of opportunties to enhance your returns.

 

Happy Capitalism!

 

 

 

 

 

 

 

 

 

 

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