The major news this morning is the soaring price of oil on optimism that OPEC members will agree to curtail production, a cut which appears to be higher than expectations.
Crude oil futures are back above $48 (U.S.) a barrel. Watch for continued volatility in the commodity price with short sellers scrambling to cover positions.
In terms of news releases today, key reports released are Canadian GDP data, fourth-quarter earnings results from Royal Bank, and third-quarter fiscal 2017 results from Descartes Systems Group.
Briefly recapping Tuesday's performance, market momentum paused. All three U.S. major markets, the Dow Jones Industrial Average, the S&P 500 Index, and the Nasdaq composite index, were up anywhere between 0.12 per cent and 0.21 per cent. In Canada, the S&P/TSX composite index lost 16 points, or 0.10 per cent. There were 125 securities in the TSX Index that advanced, 117 securities declined in value, and five stocks closed the day unchanged. In terms of sectors, eight of the 11 sectors closed in positive territory.
The S&P/TSX composite index is up 1.44 per cent month-to-date, up 1.86 per cent quarter-to-date, and has a year-to-date gain of 15.29 per cent.
On today's TSX Breakouts report, there are 28 stocks on the positive breakouts list (stocks with positive price momentum), and 19 securities on the negative breakouts list (stocks with negative price momentum), the majority of which are energy stocks.
Discussed today is a security that is steadily recovering from its recent price weakness and it may appear on the positive breakouts list in the future if its recent rebound continues. Three analysts have recently upgraded the security. It offers investors an attractive yield of 5.2 per cent. The security highlighted is RioCan Real Estate Investment Trust (REI.UN-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The REIT
RioCan owns and operates a portfolio of 301 retail and mixed use properties across the country, including 15 properties that are being developed.
On Nov. 3, the company reported its third-quarter financial results that were in-line with expectations. Funds from operations per unit came in at 40 cents, down from 44 cents last year but in-line with the Street's forecast. Occupancy increased to 95.3 per cent at the end of the quarter compared to 93.2 per cent last year. Canadian same store net operating income increased 1.1 per cent year-over-year.
Distribution policy
RioCan has maintained its monthly distribution paid to its unitholders at 11.75 cents per unit since the beginning of 2013. This equates to $1.41 on a yearly basis, and an annualized yield of 5.2 per cent.
Valuation
According to Bloomberg, the REIT is trading at a price-to-FFO multiple of 15.9 the consensus 2017 estimate. This is just above its three-year historical average of 15.4 times, and in-line with its five-year historical average of 15.9 times.
Analysts' recommendations
There are nine analysts whom have issued research reports on this REIT over the past month, six have 'buy' recommendations and three have 'hold' recommendations. These nine analysts are from the following firms in alphabetical order: BMO Capital Market, Canaccord Genuity, CIBC World Markets, Edward Jones, EVA Dimensions, Raymond James, RBC Capital Markets, Scotia Capital, and TD Securities.
Three analysts have raised their recommendations over the past month. Alex Avery from CIBC World Markets increased his recommendation to a "sector outperform" from "sector perform," Mark Rothschild from Canaccord Genuity bumped his recommendation to a "buy" from a "hold," and Neil Fonseca, the analyst at EVA Dimensions, increased his recommendation to a "hold" from an "underweight."
The average one-year target price is $29.56, implying the unit price may appreciate nearly 10 per cent over the next 12 months. Target prices range from a low of $28 to a high of $31.
The Street is forecasting funds from operations (FFO) stability for the REIT. The consensus FFO per unit estimate is $1.67 in 2016, and forecast to rise to $1.70 in 2017.
Forecasts have held steady during the year. For instance, at the beginning of 2016, the consensus FFO per unit estimates were $1.67 for 2016 and $1.68 for 2017.
Chart watch
Year to date, the unit price is up 14 per cent.
The units have been in a downtrend since the beginning of July, falling from over $30 in July to the $25 range this month. However, the unit price recently broke out of this downtrend.
Should the unit price continue to recover, the next overhead resistance level is around $28, and after that between $29 and $30.
There is downside support between $25.50 and $26. Failing that, there is support around $24, and then around $23.
The relative strength index is at 63, suggesting the units are still in neutral territory. Generally, a reading of 70 or higher indicates an overbought condition.
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The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company's dividend policy, analysts' recommendations, and provides a brief technical analysis for a security to provide readers with more information.
If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.
Securities screened are from the S&P/TSX composite index, the S&P/TSX Small Cap index, as well as Canadian small cap stocks outside of these indexes that have a minimum market capitalization of $200-million.
A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.