I always learn something via your answers to reader questions. Now I would appreciate your comments re: D+H.
Stock is going down, down, down. True, cheques are out, but they seem to be compensating with other investments, contrary to Yellow Pages’ management.
Any thoughts re hold/sell of D+H?
Thanks for your kind words and the assignment. Davis + Henderson Corp. has reduced its dependence on providing personal and business cheques to the customers of financial institutions. The segment represented 90 per cent of corporate revenue in 2006. By 2010 cheque services were down to 46 per cent of sales and lending technology and servicing solutions made up 48 per cent. The forecast for 2011 is for further improvements in the revenue mix.
An examination of the charts will provide some answers to your question.
The three-year chart indicates that investors hit the sell button in early March of 2011 as the shares approached $22.00. When I reviewed the 10-year chart on globeinvestor.com it was evident that $22.00 was the all time high. Knowledgeable investors using the tools available to them would have been taking profits when it failed to advance above the previous peak.
What is also visible is the death cross that formed in July and the firm resistance along the 50-day moving average. Every attempt to move higher has failed.
Finally if you draw a set of parallel lines to bracket the decline from upper left to lower right you can see that a trading channel has formed. If you want to see higher prices for the shares of DH it has to breakout above the upper rail.
The MACD and RSI on the six-month chart both generated a series of buy and sell signals which would interest investors who were inclined to trade in the down channel.
Given that you are deciding between a hold and a sell I would say sell before the end of the year. Take the tax loss and if you really like the story buy it back in 2012. Please consult your accountant for how best to proceed with the loss and buy back.
Make it a profitable day and happy capitalism.
Have your own question for Lou? Send it in to firstname.lastname@example.org.
Visit his website