Whitbread PLC trading in a range

May 9th, 2016 – 1 Comment

At least the downtrend has been broken


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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WTB Logo

Hi Lou,
Some Shell service stations are selling Costa Coffee, which is quite a large chain in the UK. I learned the parent company is Whitbread PLC. Whitbread’s stock sells for a chunk of change on the UK exchange, but its US ADR is about $30 US. I can’t understand the difference in the share price. Your views on Whitbread PLC as an investment would be much appreciated, especially if they expand Costa Coffee into Canada. I enjoy your commentaries and market updates on AM 640.

Many thanks.

Mike

 

Hey Mike,

Thanks for listening to AM640 and for this assignment. This will be the first time that I examine the charts for Whitbread PLC (WTB LSE).

You are concerned about the price differential between the listing on the London Stock Exchange and the American Depository Receipts. Keep in mind that the price quoted in London is in pence. There are 100 pence in a British Pound. What appears to be a substantial price in London should be divided by 100 which should quickly put the price in line with the ADR.

WTB operates a multinational hotel system called Premier Inn with 650 properties containing 50,000 rooms. It is the company’s biggest division. They also operate Costa Coffee the world’s second largest chain of coffee shops with 3,080 locations in 30 countries.

 

A probe of the charts will help inform my views in this stock.

 

 

WTB

The three-year chart indicates that WTB topped out in March of 2015 and had been in the clutches of a steep decline that finally stopped in early 2016. The stock has spent 2016 trading in a tight range with support at 3,700 and resistance near 4,100.

Patterns worth noting include the death cross that formed in the late summer of 2015 when the shares were trading near 4,600, and the break below the 50 and 200-day moving averages. Resistance along the 50-day moving persisted into 2016.

 

 

WTB2

The six-month chart illustrates the range bound pattern that has dominated trading in 2016, and the buy and sell signals generated by the MACD and the RSI since the beginning of the year. The yield on the dividend is 2.31% which you should include in your evaluation. In addition keep the foreign exchange in focus.

WTB has to renew faith with investors who have been spooked by growth concerns and the threat of rising minimum and living wages in the U.K.

The best way to approach WTB under current conditions is to establish a core position and a trading position. Your trading position will allow you to generated profits on the oscillations within the established range.

Next time I will examine Lithium X Energy Corp. (LIX TSXV) and Nemaska Lithium Inc. (NMX TSXV) for Andrew.

 

Make it a profitable day and happy capitalism!

Categories: Consumer
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