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Torstar shares consolidating after an aggressive run

Torstar-Southam br Mr. Jarislowsky helped lead opposition to a 1985 deal by Torstar Corp. and Southam Inc. to swap shares and take an ownership interest in each others’ companies to help stave off a possible future takeover bid for Southam. Mr. Jarislowsky complained to the Ontario Securities Commission that the deal locked control of the company in Southam family hands and was unfair to minority shareholders.


Hi Lou,

Any comments on Toronto Star as a stock?


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Hey Rob,

Thanks for the assignment.

This will be the first time that I examine the case for Torstar Corp. The company is a print and digital publishing group whose showcase property is The Toronto Star newspaper. The company through its Metroland Media division is involved in community weekly newspapers, digital media, flyers, printing services, consumer shows and also it offers distribution. The company also has interests in other enterprises including Black Press, Blue Ant Media, The Canadian Press, and others.

In May of 2014 the company sold its Harlequin book publishing division raising $455-million which calls into question how it will use the cash. The research I have conducted has surfaced some comments that suggest that they might be looking for acquisitions and that the cash improves the safety of the dividend which currently yields 6.73 per cent.

An inspection of the charts will form the basis of my thoughts concerning this investment.

The MACD and the RSI on the three-year chart both generated buy signals in February of 2014 as the shares bounced off support near $4.75 and started a vigorous move up in March. Make note of the pennant that formed in April which is a continuation pattern indicating that investors could expect an extension of the trend. In May the sale of Harlequin released the coiled spring sending the shares from the $6.50 range to a test of resistance near $8.00. What is evident from this chart is that the downtrend that started in 2012 has been broken and a golden cross formed in April of 2014.

The six-month chart illustrates a stock that is building a base near $7.75. An extension of the base would allow the stock to consolidate the aggressive move higher and give investors a chance to collect a generous dividend.

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Management at TS.B has to really apply itself to the challenges facing the newspaper publishing business. I am a life long reader of and subscriber to newspapers. Unfortunately those like me are aging out and the next generation seems less interested in the product. The erosion of print advertising is a big factor as more ad dollars migrate to digital platforms. Hopefully newspaper publishers can figure out how best to proceed.

Make it a profitable day and happy capitalism!

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