Hi Lou,
Can you shed some light on TRI? Ever since they announced the Reuters acquisition the stock has struggled. I own it and want to exit, but it is in registered and has no tax loss efficiency.
It also has a low beta. Help!
I was thinking of gradually switching it into a higher beta name like Cameco, which is down about the same amount. Would this be too risky?
Harry
Hey Harry,
Thanks for the assignment. When Thomson Reuters Corp. was formed some four years ago when they merged, there was lots of promise. Unfortunately the deal got done at a market top and the competition stepped up to the challenge presented by the new behemoth.
In 2007 TRI controlled 36 per cent of the desktops using financial data systems while Bloomberg had a 25 per cent share of market. Today the two are running neck and neck with TRI at 31.4 per cent and Bloomberg 30.8 per cent. Not quite the outcome everyone in management of the merged organizations had anticipated.
An examination of the charts will provide better insight into how you might proceed.
The three-year chart depicts a stock that came off a rock hard bottom and had a great ride from March of 2009 until March of 2011. But the advance stalled and it has been a trail of tears for investors who failed to realize that the good times were over.
The first sign of trouble surfaced in May of 2011 when the uptrend line was breached. The second sign that it would have been prudent to book some profits was when the death cross formed in June. Finally when the stock failed to hold support at $37.00 there was nothing left but the crying.
The MACD and RSI on the six-month chart both signalled weakness in mid-November of 2011 when the shares sold off from $30.00 down to $27.00. Currently there is support at $27.00 and the MACD and RSI look to be turning up.
With new management set to be taking over in the new year and a reorganization designed to speed up decision making, it would be worth waiting before selling. In addition the dividend yield is 4.6 per cent which is very attractive in today's environment.
As far as selling TRI to buy Cameco these are two totally different businesses with completely different risk profiles. One is in the business of providing information to professionals while the other takes on the risk of developing uranium deposits. I am not sure there is a valid comparison that can be made.
Make it a profitable day and happy capitalism!
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Lou Schizas