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STOCHASTIC OSCILL


Another "Foreign" Investment?

08/22/06 02:11:39 PM
by Koos van der Merwe

On August 15, I wrote an article, "Investing Foreign?" where I stated that if you want to invest outside the United States, there was no better country to consider than Canada. Here is another income trust worth looking at.

Security:   N/A
Position:   Accumulate

The Yellow Pages Income Fund is currently one of Canada's largest income trusts with two national platforms, one in directories via Yellow Pages Group, Canada's largest directory publisher, and one in vertical media through Trader Corp., a Canadian leader in print and online vertical media. Its network of websites, which notably includes YellowPages.ca and Canada411.ca, combined with Trader Corp.'s online properties such as AutoTrader.ca, reaches close to 45% of all Canadians online. Its market capitalization is approximately $7.5 billion.

Last week, on August 17, Marc Tellier, president and CEO of Yellow Pages Group and CEO of Trader Corp., stated:

We are very pleased to be included in the S&P/TSX 60 large-cap index. Our addition to these indices confirms our position as one of Canada's leading media companies and reflects our remarkable growth since our IPO in August 2003.


Inclusion in the index means that every pension fund will now have to purchase the trust as they construct portfolios that equal the index. The share price fell over 10% the past few weeks after a bearish report by Veritas Investment Research on July 19. The report sparked fierce debate among various analysts, who questioned the findings by Veritas, noting that their directory revenue and EBITDA had increased between 2003 and 2006.


Unperturbed by the debate flying around it, the Yellow Pages Group Co. announced its intention to purchase the Manitoba Telecom Services's media unit for $275 million in cash. The share price promptly started rising, and with a yield at the present price of 7.32%, it looks very attractive. What do the charts tell us?


FIGURE 1: YELLOW PAGES INCOME TRUST, WEEKLY
Graphic provided by: AdvancedGET.
 
The weekly chart (Figure 1) suggests that a C-wave is possibly complete, and the price could now start moving upward in a new five-impulse wave. The four-wave shown is the period when the then–Minister of Finance, Ralph Goodale, announced that the present Liberal Government was considering a change in the tax status of income trusts. He quickly retracted that statement as the Liberal Government lost votes and lost the coming election.

FIGURE 2: YELLOW PAGES, DAILY
Graphic provided by: MetaStock.
 
A daily chart (Figure 2) shows that the time to buy the share is not yet on the cards, but very close. Note the following:

    The stochastic relative strength index (RSI) is approaching oversold levels.

    The on-balance volume (OBV) (pink dot) has become neutral (no dot).

    Volume appears to be declining as the price approaches the support line.


Is Yellow Pages a buy? Perhaps not yet, but it sure does look attractive. What is the rule? Use fundamentals to tell you what to buy, and technicals to tell you when to buy. The what is there, now it's the when.




Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

Address: 3256 West 24th Ave
Vancouver, BC
Phone # for sales: 6042634214
E-mail address: petroosp@gmail.com

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Date: 08/23/06Rank: 2Comment: 
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