GT Blog June 25, 2009

An interesting item in the Globe Report on Business today - Number Cruncher - Steve Ladurantaye produced a list of TSX listed issuers with high cash positions. The implications here is that lots of cash is a good thing because of the possibility of increased dividends and or share buybacks. Onex is apparently sitting on a cash hoard of about $18 per share so at the current $20 you only pay $2 for all of their operating enterprises

Other cash rich issuers are Fairfax Fin, Celestica, Transat AT, Aecon, AGF Mgt, Westjet, Atco, BMO, Sun Life, Manulife, Hudbay, Power Corp and Magna

Now before you even think about buying these gems you have to ask - why all the cash? I have found that cash rich companies can be poor investments because too much cash relative to the working assets can be a sign of a dying company that investors are using as a piggy bank

Share buy-backs are a good way for shareholders to loot the treasury

I once thought of Onex to be a growth company - and now I am not too sure - so here is the acid test - if over the next few months management puts the cash to work growing the company I want to own the stock - if management does a share buyback run away and let the stock languish for another ten years

To Grow or to shrink - that is the question

For GT Blog June 19, 2009

Let’s listen on a broker advisor & client conversation

Client: How come we are still sitting in cash when the market has been going up since early March? I recall your slogan is to buy-hold and sell, and know when to buy again.

Broker advisor: Our models tell us this a bear market rally and that we will correct down to re-test those March lows because there is no leadership to sustain the advance.

Client: No leadership? How come the Nasdaq is up 50% from the March lows?

The client remembers when the North American tech sectors had a big growth spurt through the 1990's with the group building an exponential price spike in early 2000. The prime driver was the spending boom stimulated by the Y2K fiasco. Remember when all tech driven devices were to stop at New Years Eve 1999? PC's were to explode and planes would fall from the sky.

What we did get was the great 2000 - 2002 Granddaddy bear that introduced a secular down trend in the technology sector which is still in place. Nortel stunk up the space and investors moved on to the income trust sector only to get burned again. Now we all want to own energy and potash stocks - the ownership of tech stocks is just not fashionable

Keep in mind the rules of a secular down trend - the secular down trend will have at least 3- bull and bear cycles and one of then (usually the first ) will be a Granddaddy - now we are just into cycle 3 and this could mark the end of the long down trend with a surprise to the upside in 2009-2010

Note the three bears of Cisco and Texas Instruments - these sleeping giants will soon awake and catch many by surprise - remember it is buy-hold, know when to sell and know when to buy again.

For GT Blog June 17, 2009

One blog ago I promised to provide a list of small cap technology names that may generate a surprise recovery through 2009-2010

Unfortunately the recent down days have sent me back to the chart room to write a stock filter that will select stocks displaying strength during a period of general weakness

The filter had several arguments or if-than-else conditions

The closing volume had to be greater than the average 10-day volume
The close had to be greater than the previous high
The price had to be greater than $2.25
The closing volume had to be greater than 250000 shares

There were only 16 names selected from the Canadian data base of about 1100 names and there appeared to be a slight common theme along with a few surprises

Here goes and pardon the lack of detail – its late and I am tired

ACE Aviation, Agnico Eagle, Groupe Aeroplan, Cogeco Cable, Labopharm, EPCOR Power, Jazz Air Income, Kinross Gold, Livingston Int’l, Magna Int’l, Novagold Res, New Gold Inc, Petro Andina Res, Pembina Pipe, Sherritt and Sino Forest

Disclosure – Getting Technical is long the shares of New Gold Inc.

For GT Blog June 12, 2009

Let’s listen in on a broker client conversation

Broker (investment advisor): The technology stocks are getting really strong

Client: How strong are they?

Broker: They are so strong even the Mavrix Strategic Small Cap Fund is up this year

Client: Wow – that is really strong - I see the Mavrix Fund Management shares (TSX-MVX) have bounced up to 24 cents and they may be added to the BNN stock ticker just like Allen-Vanguard Corporation (TSX-VRS)

Now for some reality – we at Getting Technical examined the cyclic structure of the TSX Information Technology index and were confronted with a strong bullish scenario. Following a decade of growth in the 1990's the group peaked in 2000 and the great 2000 - 2002 Granddaddy bear introduced a secular down trend which is still in place.

The rules of a secular trend look good for the sector - the secular down trend will have at least 3- bull and bear cycles and one of them (usually the first ) will be a Granddaddy - now we are just into cycle 3 and this could mark the end of the long down trend with a surprise to the upside in 2009-2010 - next blog we look at some small cap tech names

For GT Blog June 8, 2009

Let’s listen on a broker client conversation

Broker (investment advisor): The infrastructure stocks are getting really strong

Client: How strong are they?

Broker: They are so strong even the O'Leary Global Infrastructure Fund went up 5 cents this week

Client: Wow – that is really strong we bought the O’Leary fund when on the IPO last December and it is down 10%, how come we just didn’t by SNC Lavalin Group – it is up 26 per cent over the same time period

Broker: That is because we agreed you must be diversified – O’Leary is on several TV shows, he plays a little guitar, he owns a mutual fund business and on top of that he is an investor – just like you.

Client: Your right, let me know when the Don Cherry fund comes out.

Now for some reality – we at Getting Technical ran one of our weekly relative perform filters on the TSX – we were looking for stocks in the early stages of out performance vs. the TSX Composite index. To our surprise the infrastructure stocks dominated the filter selections – have fun and remember – investing and reality TV do not mix

For GT Blog June 2, 2009

The great advance in most of the major world bourses from the early March 2009 lows rolls along leaving the bears sitting on the sidelines praying for a correction. Nothing gets in the way as fears of swine flu and a GM bankruptcy are brushed off

Back here on May 12 I referred to my Toronto Star "recognition point" column of March 3, 2009 setting out the technical conditions that have to be met in order to declare a new bull market. One condition was met a week earlier when the TSX cleared the recognition point (TSX Comp 9500) and entered into bull market territory. The current advance is now an official 2nd up-leg or Elliott wave (3) bull market advance

The "recognition point" can occur anywhere from a third to one-half way into the Wave 3 advance - if we assume the half way point we can now set time and price magnitude levels this would give us a price target of 11500 on the TSX Composite Index and a time target of the first week of July 2009

Now the bulls have a pleasant investing dilemma - do they hold on for more or should they rotate down to lower risk stocks? The bears have an unpleasant investing dilemma - do they sit on cash and pray, or should they capitulate and jump into lower risk stocks?
Our weekly Rotation Table clearly sets out the risky leaders - Metals & Mining, Financial, Technology and Energy. The lower risk laggards are Gold, Staples, Telecom & Utilities