Picture still fuzzy on Quebec media giant

The Stock: Quebecor Inc.

Trend

Competition in the media industry is driving fresh moves toward convergence. BCE Inc.'s return to the content arena - a $1.3-billion investment in CTV and its media assets - is the most high-profile evidence of the renewed push toward marrying content with distribution channels.

To date, though, the stock performance of Canadian media conglomerates is a mixed bag. Yes, BCE and Telus Corp. have remained in a Stock Trends Bullish category since the third quarter of 2009, but the stocks of Rogers Communications Inc. and Shaw Communications Inc. have been in bearish trends. Investors anxious about the downward drift of media stocks should set their phones for stock alerts and watch the tickers on their television screen.

The Trade

Quebecor Inc. is a media conglomerate that controls a large share of the Quebec market. Its purchase of Groupe Vidéotron and its TVA Group broadcast properties in 2000 made Quebecor the largest cable operator in its home province. It owns a stable of French-language publishers as well as Sun Media group, Canada's largest chain of urban tabloids. The company's stock performed better than most major Canadian media stocks coming out of the 2008 recession. It was tagged as Stock Trends Bullish in mid-2009 at $19.71.

However, shares of Quebecor have been slipping in 2011, falling to the $34 level from the $39.62 point they reached in November of last year. An impending crossover of its moving average will put Quebecor in a Stock Trends Bearish category.

A Stock Trends Bearish Crossover - indicating the 13-week moving average trend line has dropped below the 40-week moving average trend line - makes further drops in the share price a likely result. Shareholders should prepare to have their commitment to the stock tested.

The Upside

The trends suggest it's time to sell. Continued market underperformance puts this stock at a risk of dropping another 10 per cent before technical support kicks in.

The Downside

Canada's economy is generally considered to have a positive outlook, which should benefit media stocks. Indeed, some analysts are still keen on Quebecor because of its hold on its home province and potential for growth in the wireless area. If the share price scales back above $36, this bearish call could be reconsidered.