President and CEO of Torstar David Holland speaks to shareholders at their annual general meeting in Toronto on May 7.Aaron Vincent Elkaim/The Canadian Press
What's black and white and green all over? The trading accounts of shrewd investors who, despite the ongoing misfortunes of the newspaper business, have been nimble enough to play a seasonal increase in the stock of Toronto Star publisher Torstar Corp. in the past five years
The company once again reported bleak quarterly earnings this week, as fourth quarter revenues fell almost 10 per cent year over year while operating earnings fell by more than 25 per cent. Even digital revenues, which are supposed to be replacing steadily decaying print advertising revenues, fell by 7.9 per cent, similar to the misfortunes facing other newspaper operators.
But for adventurous short-term investors, there has been money to be made on Torstar shares - so long as they know when to discard the stock faster than fishwrap. In each of the past five years, Torstar stock has "experienced a healthy seasonal bounce during the winter months," National Bank Financial analyst Adam said in a note this week.
Sure enough, the pattern has borne out every year since 2011: the stock starts off strong, then by spring or summer, it starts to tail off and usually ends the year lower than where it began. The stock opened at $12.21 in January 2011, popped to the high $14s by April, then began a deep swoon, ending the year at $8.28. It was the same story in 2012, as the stock popped to around $11 in April before skidding to the $7 range in December. The stock then rose to above $8 in early 2013, then skidded to below $6 by year end. The 2014 bump lasted longer than usual as the stock rose to the mid-$8s and stayed there well into July, but the stock fell back to around $6.50
Now, it's happening again. The stock closed Wednesday at $7.44. Are today's gains destined to be old news before long? Mr. Shine thinks so. "Gains have not held through the year" after each of the previous recent winter bounces, Mr. Shine said in his note. His call on the stock is a $7 price target and a "sector perform" rating, with the company facing "headwinds aplenty…as it manages contracting businesses."
Sean Silcoff