Hi Lou

Here is my situation.
I invested into DGI.UN both in a RRSP account and a regular investing account.
I purchased shares at the beginning of 2010. The shares went up but now they are
below what the original purchase was. The Dividend in the RRSP account gets reinvested.
This seems to help my share value however in my other account, I have not invested any more.

In your opinion, is this stock worth holding onto?

Thanks,

Mike

Hi Mike,

Anna from Montreal asked about Data Group Income Fund (DGI.UN TSX) on June 10, 2011. The units were trading for $5.82 at that time and the yield on the distributions was 11.2%.  What was noted in the analysis was that the units were in a gentle down trend and that the indicators were suggesting continued selling. Take a look at that post as part of your investment review.

Unfortunately the selling did continue and your question is how best to proceed. A survey of the charts will provide some guidance as to a go forward plan.

The three year chart indicates that what had been a gentle downtrend became a rout in July when the units could not hold on to support at $5.00. There is now an established downtrend and a death cross on the chart. These are signals that it’s time to seriously consider taking your loss and getting to your next trade.

The six month chart illustrates the resistance that the shares have met along the 50 day moving average on several attempts to move higher. The bounce off of the rock bottom at $2.39 stalled out at $3.75 on the last test of resistance. The MACD and the RSI are currently flat at best with no indication of direction.

In the June 10, 2011 post there were signs that the units were beginning to weaken. The yield on distributions is now at 21.1% which for a microcap company is indicative of the risk you have to assume if you are going to continue to hold these units. 

Make it a profitable day and happy capitalism!

Hello Mr. Schizas,

Do you know anything about a stock called Kronos? Apparently they have the US highway line painting (titanium)business “tied up”, with a 5 yr. backlog of orders. If this is the case, along with Mr Obama’s plan to inject another billion dollars into highway/infra structure development, would you consider this a viable long term (3-5yrs)play?

Thank you for your time,

John

Hey John,

Thanks for the assignment. The most frequently asked question in the universe of investing is ” Do you know anything about..?”.  My most frequent answer is more often than not a resounding ” not one single thing”. However in the modern era with a personal computer and a connection to the internet all can be revealed. 

 Kronos Worldwide Inc. (KRO NYSE) is a leader in the production of titanium dioxide pigment used in paints and plastics. The chemical  is desired because it provides optimum whiteness and opacity.  On September 30, 2011 the company announced a price increase of $0.25 per pound which can only help the bottom line.

Lets run the charts and see what we can learn about the prospects for KRO.

The three year chart indicates that the uptrend that the shares had been riding since the summer of 2009 has been broken. But what a ride from a low of $2.50 to the all time high of $34.50 in July of 2011. There is also a death cross that has formed which cannot be ignored. 

The six month chart illustrates the bounce off of the October 04, 2011 low of $14.16. producing a 34% gain in three weeks. Yowzer! The question that we need answered is does KRO have anything left in the tank?

The MACD and RSI are signalling continued momnetum to the upside. The October move has formed a pennant which is a continuation pattern. The pennant suggests that there is still some upside left in the advance.

There is resistance at $20.00 that has to be taken out if this run is going to contunue. The next corporate event for KRO is the release of  Q3 results which  is scheduled for November 3, 2011. Volume which was strong at the beginning of October has thinned out. The lower number of shares trading has not been an aggressive drop but a pullback none the less. 

I can’t give you a forecast for a 3-5 year period. I just do not feel its a realistic time frame. What I can tell you is that if KRO breaks above $20.00 it can run to $22.00 without a lot of resistance. Watch for a breakout and the calendar for the release of Q3.

Make it a profitable day and happy capitalism!

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! 

DEAR LOU,

PLEASE GIVE ME A LITTLE INFORMATION ON THE ABOVE COMPANY. IS IT SAFE TO HOLD BEARING IN MIND THAT THE DIVIDEND IS .65 PER ANNUM.

THE LAST QUARTERLY REPORT WAS O.K. AND THE STOCK WENT UP BUT NOW IT SEEMS TO KEEP ON GOING DOWN AGAIN. ANY ADVISE??

THANK YOU VERY MUCH FOR YOUR INPUT. I KNOW YOUR INFORMATION IS ALWAYS RELIABLE.

ANNA IN MONTREAL

Hi Anna,

Data Group Income Fund ( DGI.UN TSX) is in the  specialty printing business producing business forms, event tickets and the like. The trust is currently in the process of converting to a dividend paying corporation and estimates that it will have completed the process by late 2011.

Lets examine the charts to see what we can discern from the past and perhaps gain some insight into the future.

The three year chart paints a picture of units that are trading in range with a gentle downtrend. The units had a lovely rise from August of 2009 when it traded at $2.25 until April of 2010 when it peaked at $8.50. Since then the units have met resistance every time it has tried to move higher.

The dividend yield at the current payout is 11.2% which is very generous and reflects the risk associated with the investment.

The six month chart outlines the move off the lows of May 2011 when the units hit $5.30 and caught a bounce to $6.50 where overhead resistance stopped the advance. The RSI and the MACD both generated a buy signal at $5.30 and a sell signal at $6.50.

At this point in time it appears that the indicators are suggesting continued selling should be expected. Over the last three months the average daily volume has been 56,469 units. In the last twelve sessions the volume has been below the average. If trust units or shares are going to go up it has to be on better than average volume. 

DGI.UN is a micro cap company operating in the specialty printing business offering what would have to be seen as a very generous yield. Both of these factors indicate a higher risk profile.

MAKE IT A PROFITABLE JUNE AND HAPPY CAPITALISM!

I bought this stock when it still was called Coolbrand (COB.TO). Since they merged with Swisher last September the stock has doubled.

My question is, should I sell and lock in the profit, wait or buy more? Your expert advise (as always) would be greatly appreciated.
Thanks
Bob

Hi Bob,

I last posted research regarding  Swisher Hygiene Inc. ( SWI TSX) on September 24,2010 when it was trading at $3.78. At the time I mentioned that you didn’t want to be betting against Wayne Huizenga the serial entrepreneur who has created a number of Fortune 100 companies.

 Since the deal with Cool Brands was completed SWI has been raising money and buying companies at a rapid pace. The frenzy of acquisitions has been the fuel driving the stock higher. As long as the company can continue to roll up players in the cleaning and maintenance space the stock looks like it has more room to grow. The charts will provide guidance as to the future potential of SWI.

The three year chart illustrates the rapid and continued rise in the price of the stock since August of 2010. The stock pulled back in November of 2010 as it hit $6.00 retreating to $4.00 in December. But after that it got back onto an uptrend, consolidated until late March at $6.00 amd then took off in April of 2011.

The six month chart provides a sharper image of the movement in SWI. The MACD has been providing a series of buy and sell signals since November of 2010. The sell signal in November at $6.00 ,followed by the buy signal in December at $4.00, another sell in February at $6.50 and the buy in March at $5.75.  All of these trades generated great opportunities to clean up with SWI.

As of this post the RSI is clearly indicating that the stock is overbought but not yet pulling back while the MACD has yet to rollover. But that doesn’t mean it won’t. I wouldn’t bet against Huizenga but I also wouldn’t want to buy and hold this stock. SWI is providing attractive trades while it advances and it is also generating effective signals ahead of its moves.  To your question regarding taking a profit I would say yes but think about a strategy of selling on advances and buying on pullbacks.

Happy Capitalism!

Hi there,

I have a question about Air Canada – do you see a bottom for this downward slide anywhere soon? Going by the numbers it looks so undervalued to me…

Jocelyn, Vancouver BC

Hi Jocelyn,

I last posted regarding  Air Canada ( AC.B TSX) on September 27, 2010 from a request by Wayne. At the time a number of points were made. The first thing was that the stock was in an uptrend and could run to $4.00 without much resistance from the $2.86 it traded for on that day. Another factor that was discussed was the period of seasonal strength that transportation stocks enjoy from September to November.

 When we look at the charts its as if the market was reading from a script. The stock ran to $4.00 and reversed the uptrend as we got into November. Hard to complain about a 39.8% return in five weeks. Lets do some work and see if we can surface more value.

The three year chart illustrates the move to $4.00 and the trend reversal at the beginning of November 2010. The RSI indicated that the stock was overbought and we also got a signal from the MACD that momentum was shifting from buying to selling.

The six month chart tells the tale of the tape of a sell off that has chewed up just over 42% of value from the November high. The RSI and MACD both clearly generated sell signals in November of 2010. If you are looking for a bottom on the stock remember that you want to confirm the bottom not anticipate it. The best time to buy a stock is when its going up, not when it is going down!

At this point it looks like AC.B will have to retest support at $2.00. Another thing to keep in mind is that airline stocks tend to have an inverse relationship to the price of oil. Since November of 2010 oil has moved from $80 a barrel to $108.00 a barrel. Jet fuel is the second largest expense for airlines after staff so as costs go up the price of the stocks go down.

Happy Capitalism!

Good morning Lou,

I have been tracking Boyd Group for some time, they are making quite a few acquisitions all through North America. Management looks strong.What is your take on long term growth and sustainable dividend.

Thanks
Ken

Hi Ken,

Thanks for the assignment. Boyd Group Income Trust (BYD.UN TSX) is an interesting case of a management team that found a way to continue to operate as an income trust and increase its distributions to unit holders. Over the years  BYD.UN has developed a profitable footprint in the United States. They use cash generated south of the border to pay unit holders their monthly distributions. Those funds are not subject to the tax revisions embodied in the provisions announced on October 31, 2006 by The Harper Government. You have to love it when aggressive branding cuts both ways.

Another internal restructuring announced by the company is that they intend on transfering allowable tax deductions to their U.S. operations where they pay higher tax rates. This move also provides the company with additional cash.Currently BYD.UN offers a yield of 4.4% on a payout ratio of 24.7%.

The charts will tell the tale of where this trust has been and where it might be going.

The three year chart provides a textbook example of a strong advance with some challenges but no breaches of support. The move from the December 2008 lows at $2.00 has provided ample rewards for investors who rode through the rough patch in mid 2010 when the units tested support along the 200 day moving average.

The six month chart depicts the move higher in late March of 2011 on the anticipation and reporting  of  Q4 results which took the units over $9.40. The MACD generated a buy signal on March 21, 2011 when BYD.UN was trading at $8.25. A 14.5% capital gain in less than three weeks is attractive to say the least but does suggest that the units have gotten ahead of themselves and are likely to pull back a bit.

BYD.Un is in the profitable segment of auto repairs servicing the needs of the auto insurance industry. They are growing through acquisitions and focus on deals that are accretive to earnings. The fact that their management team found a way to increase their distributions to unit holders is a tribute to their inventiveness and creativity. Those factors alone should give you some comfort as the the long term prospects for this trust.

MAKE IT A MASSIVE WEEK AND HAPPY CAPITALISM!

Lou,
What do you think of BBD.B I see lost of buy recommends, but all I have seen of late is this stock loosing value, any thoughts?

Thanks,

Brad

Hi Brad,

I last posted on Bombardier Inc. ( BBD.B TSX) for Dan on October 16, 2009. He wanted to know if he should book profits or continue to hold. At the time I suggested that he would be best served taking some money off the table. The stock continued to run until April of 2010 when it gave back most of its advance. BBD.B is not a buy and hold stock and has not been one since the 1990′s. You have to trade this one for income. Lets consult the charts for a better sense of trend, support, and resistance.

The three year chart indicates that the stock is currently range bound with support at $4.50 and resistance at $5.00. The  shares have cycled through the range three times since June of 2010.

The six month charts illustrates that the MACD has proven a good indicator of momentum. In September a buy signal emerged that foreshadowed an $0.80 move to the upside for a 18.6% return. By mid October the MACD generated a sell signal at the high of $5.30. From there the stock retreated to $4.60.

Currently the MACD looks to be about to move higher suggesting a buy.

I think that there is a trade here that could make you a few bucks to the resistance point at $5.00. But you will need to be fleet of foot to avoid letting your profits slip away. There isn’t much in the data stream that would suggest that the company is on the verge of a business breakthrough that will get it on a sustained uptrend.

Happy Capitalism!

I have some shares in ADF Group I bought at $3.50  almost two years ago. Should I cut my loses and cash in or keep it for a bit longer?

Hi Lou

Could you review Air Canada  (AC.B TSX) . What is your price target in the next 6 months?

Wayne

Hi Wayne,

Thanks for the assignment. I have to admit that I have never been a big fan of the airline sector. There is too much capacity. Every country in the world is operating a money losing airline and they are all using low prices to cut each other’s throats. Great for consumers tough on investors. Air Canada (AC.B TSX) has about $1 billion in debt coming due by 2012 and intends to pay off the debt by holding back on buying aircraft . The other part of the go forward plan for Air Canada is to expand international routes.

The charts seem to be signalling that despite my personal misgivings there could be opportunities with this stock.

The three year chart illustrates the steady rise in the stock since October of 2009 as the global recovery gave consumers the confidence to travel for business and pleasure.

The shares of AC.B bounced but from a very low base. It has added $1.80 a share in that time which is always a sweet outcome for investors. At this point the stock isn’t facing much in the way of resistance all the way to $4.00.

The six month chart tells the story of a stock that is currently overbought according to the RSI and may have to pull back. Having said that there is support at $2.50 and transportation stocks tend to enjoy a period of seasonal strength from September to November.

I would say that AC.B, although a long time money shredder, could provide an opportunity to catch a ride for the next ten weeks. After that all bets are off.

Have a nice flight and Happy Capitalism!