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Boston Pizza's heart-shaped pizza
Boston Pizza's heart-shaped pizza

Stock Trends

Market appetite for Boston Pizza rising Add to ...

The stock: Boston Pizza Royalties Income Fund

Recent price: $12.52

Trend: When the stock market delivers hefty capital gains to eager investors clamouring to get into the hottest stocks, it's not surprising that some investment opportunities get overlooked.

Mining stocks, gold stocks, and energy stocks tend to get the most attention on the Toronto Stock Exchange - and that's not surprising, either, considering the size of the market capitalization of these important resource sectors.

But sometimes there are pockets of trending stocks that fall into the domain of less exciting industries. And sometimes investors should take note.

Take the world of pizza, for instance. If there ever were a restaurant commodity, pizza must surely qualify.

This food staple for the middle class and daily meal for generations of university students deserves some investor notice as the year commences.

Perhaps inspired by the seasonal influence of the National Football League playoffs, pizza stocks south of the border have been fired up in recent weeks.

Domino's Pizza Inc., Papa John's International Inc., California Pizza Kitchen Inc., and BJ's Restaurants Inc. all attracted heightened trading activity as they advanced significantly last week. Domino's stock jumped 20 per cent as it broke above share-price resistance and hit a new 52-week high.

Canadian pizza lovers might have also noticed the breakout of Pizza Pizza Royalty Income Fund at the end of 2009.

The trade: Scaling to a new high on the Toronto Stock Exchange last week was Boston Pizza Royalties Income Fund. The fund's unit price made new highs in all but one week since the beginning of December. Fund holders welcomed the reversal of the unit's bear trend one year ago and Boston Pizza has been Stock Trends Bullish since last May.

The units do not trade a lot, but they trade consistently, helping to keep its price performance premium over the broad market throughout the final quarter of 2009. Although the unit price has doubled since its low, investors should still be interested in this consumer cyclical exposure.

The upside: Technical analysts generally look to past price levels to determine where an investment objective can be set. Of course, the value of an income trust is determined by the market's appetite for the underlying income stream delivered by the company's payouts.

The current unit yield is 11 per cent, and has dropped correspondingly as the units have appreciated. But at the height of its last bull trend in 2006 the unit price was supported by a yield of about 7 per cent. That valuation would add another 50 per cent gain to the unit price.

However, if the units maintain their bullish trend, the next technical price objective should be around the $15 level.

The downside: Restaurants are part of the consumer discretionary sector, and will depend on a continued economic revival. Unit holders should tend toward patience with this investment, but more active investors can monitor for a change in the price trend. The 13-week moving average trend line is currently marking support at $11.50 - a potential stop for those looking for an early exit.

Skot Kortje has been analyzing stock market trends for 15 years using trend analysis. His Stock Trends indicators have been published by The Globe and Mail since 1995.

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