Lou,

I was wondering if I could get your opinion on Wajax Corp (WJX). They were formally an Income Fund and now as a Stock pay a good dividend of approximately 7.5%. The stock price appears to be relatively stable and the dividend appears to be increasing over time. Would this be a good choice to add to a portfolio? Are there any potential down sides to a stock like this that I may be missing?

Andrew

 

 

Hi Andrew,

Wajax Corp. (WJX TSX)  has been in business for 153 years and operates in three core areas of distribution. The first where they earn 50% of their revenue is the mobile equipment sector. The second where they derive 27% of their sales is centered on industrial components. Their third focus is in power systems that contribute 23% to the top line. The dividend yield is currently 6.7% and the payout ratio is 68%.

Here’s the rub. The stock has been selling off since May of 2011 and has a lot of work to do to get back on the right track. The charts will illustrate the trend currently in play.

  The three year chart depicts an established downtrend and a death cross that surfaced in August. These are not signals that suggest a good entry point. From the 52 week high of $44.90 on May 11, 2011 the stock has given up 28.46%, despite an increase in the dividend  on August 03.

The six month chart provides a close up  of the downtrend and death cross that have plagued the shares. The bounce off $28.00 stopped dead when it hit resistance along the 50 day moving average. The MACD and the RSI are both pointing downward so I suspect that we may have to retest $28.00.

WJX depends on economic growth to drive its success. The current environment has introduced a lot of uncertainly and that’s not much help when you are distributing heavy equipment, power products, and industrial parts.The company is expected to report their Q3 results on November 03, 2011. Make sure you are on your game in advance of that flex point.

The best time to add a stock to your portfolio is when its going up. I suggest you put this one on your watch list for a better entry point.

Make it a profitable day and happy capitalism! 

Can you give an opinion of CAT on the NYSE?

Thanks
PS: I appreciate your radio good humour

D.

 

Hi D.,

Caterpillar Inc.  ( CAT NYSE) is the name behind all the heavy equipment you see working on building, mining, and industrial sites. If you have young boys in your family you will know that  some CAT gear is featured on  the TV series ” Mighty Machines”.

CAT had a great run from the lows but at this point the uptrend is broken and a the decision to chase it needs some serious thought.

The three year chart provides a view of the uptrend that started in March of 2009 and met resistance at $65.00. If you draw a horizontal line across the chart at $65.00 you can see that this level used to provide support and now provides resistance.

The six month chart indicates that there could be an opportunity to catch a ride on a stock that has made a turn from the sell off that started in January 2010 where CAT fell from close to $65.00 to almost $50.00. The MACD has turned up and the RSI also signalled reversal of the selling trend. The price action also shows that CAT is now trading above the 50 day moving average.

Another factor that comes into play at this time of the year is the build up to the summer construction season when contracts are assigned. CAT looks to be in a good place for a trade from these levels to $65 which would generate a double digit return.

Happy Capitalism!