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Update: TRI

I always enjoy receiving emails from inquisitive readers, fellow investors & blogging peers on thoughts, recent investing activities, specific stocks I’ve discussed and outlook on the market in general.

Many bloggers & investing peers from CB Forums & FWF will know MCM (Middle Class Millionaire). I received an email today regarding my past analysis of Thomson Corp (TOC) and my current view of the company during its recent slide in price. At his encouragement I’ve included my thoughts:

MCM Wrote:
Hey Brad,

I know you’re a big fan of TOC and I was wondering what your thoughts were on them at these levels. Are you buying more? or do you anticipate a further decline in this name.

Nurseb911 Wrote:

Still a big fan of the company from a fundamental standpoint and valuation, but I’ve grown patient with this stock as of late. My avg. cost is right around $41 ($40.84?) and I’m not adding any more until I see the absolute floor on the price technically.

Nothing has changed from a re-modeling perspective and that’s the tough thing to weigh when looking at this stock. So you have to ask yourself how long are you willing to hold for. Now if you’ve held over the last….say 5 years…you’ve likely lost a lot of your investment, seen the CDN$ eat into the dividend and just gotten completely frustrated with it. The recent sell off IMO is just that. People are saying “What have you done for me lately” instead of “What will you do for me in 5 years?”

The outlook I’ve given to some investing friends is: if you don’t have the patience to see this company in 5-10 years, then just don’t buy it right now….catch it on the upswing in 3-4 years. It’s really that simple. This company has done everything that I like from a Value Rules perspective: selling non-core assets, focusing on doing what they do best, strong management, international scope, pricing power, penetration into new markets, etc….I can go on & on.

The difficulty is in trying to assess what the market is pricing in & whether that factors into at what price you want to pay. So the US financial industry is likely pushing the US economy into recession along with the real estate & consumer market (that’s my opinion). We’ve seen layoffs, likely more and that will affect both Bloomberg & Thomson-Reuters subscriptions over the short-term. There are questions of whether regulators will approve of the merger & then the logistical headache of merging two giant information companies into one & working out the harmonies & synergies to reduce costs. Reuters & Thomson also have extensive non-financial media revenue sources (general worldwide news) and business-to-business units.

From a strategic management focus everything about this deal makes sense. This stock makes sense to me and heavily invested insiders have been buying TRUCKS of the stock over the past 12 trading days setting up a floor ~$32/share as well as plowing the discounted dividend back into the DRIP on the discounted stock price.

At some point when the merger goes through, their business fires on all cylinders, expands, revenues/profits grow, the financial sector recovers & markets only have two choices for receiving financial information from….the true value of this company will be seen. Now that might not be anywhere in the near future….you might be able to pick up this stock here at this price, lower or slightly higher in the next 12 months. But for my portfolio with an investing horizon of 20+ years….the company makes complete sense from a diversification, value, dividend growth & strategic execution viewpoint.

I could be wrong. But the P/E has compressed significantly, revenues are increasing, they’re trimmed the fat from their balance sheet & business operations and have every intention of being the best of the best across the world.

So….no, not adding more just yet. It’s already 8% of my portfolio and I have objectives (REIT’s, metals, O&G, etc) to complete from a diversification standpoint before I go back and add any more to current holdings. If I was just looking at it today….maybe buy a little (1/3) with the intention to DCA down further over the long-term. But other than a few very specific stocks, at the moment I’m not buying a whole lot of anything. When you look at the technical charts for almost every stock on my watchlist that I don’t own – it scares me. We’re easily breaking through resistance at levels I wouldn’t have anticipated the market to push certain stocks to and that signals to me that we’re likely in a bearish phase or a very steep decline over a short-period of time in the near future.

So…..I’m just basically continuing to hoard cash, focus on what companies I will buy at what absolute price & leaving my existing portfolio (BNS, CNR, EMP.A, IGM, MFC, MRU.A, RY, SAP, SC, SLF, TD & TOC) to sit idle. Right now (10:27am) I’m sitting around a 4.5% loss on the portfolio and I don’t really want to see that go any further right now unless stock prices depress significantly. For each of those if they hit certain prices I’d be a fool not to add to…but we’re likely not there just yet. I’m a very different investor and I’ve studied extensively in business school the psychology of markets, investors, business principles, etc. What I see right now makes me uneasy and I think any of what we (as a group of investors) own right now could trade significantly lower if things turn even more sour. If the market sits idle for a few months then I’ll start to buy back in slowly….but looking at the charts I’m not sure I see a bottom across specific names or sectors at the moment. All you can do is guess right now and I’m not someone who likes to do that 🙂

TOC: Bottom Line
– 1/3 would be good right now if you believe in the long-term
– None right now if you don’t
– Probably going a little lower ($32) before you see insiders supporting the stock price

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