We’re fundamental analysis first here at the Motley Fool. However, in certain instances, embracing technical analysis can supplement your research and help you get a better near-term entry point in a stock that you already intend to hold for the long term.
Whenever you’ve got a company with a strong fundamental story with a stock that’s attractively priced, and the technicals imply substantial nearer-term upside, you’ve got an incredibly timely stock that you should pull the trigger on.
As you may have guessed, it’s quite rare, especially in a market that’s at all-time highs, to find a stock that at any time meets all three criteria: being cheap, fundamentally sound, and technically strong.
At today’s levels, I do see one such stock that I’m inclined to pound the table on. Enter Shaw Communications (TSX:SJR.B)(NYSE:SJR), an out-of-favour Canadian telecom that I believe just hit a massive buy signal, with a green light in value, fundamentals, and timeliness.
Value and fundamentals look attractive at around $27
Shaw stock has been hovering in limbo for many years now, with many long-term shareholders having little to no capital gains to show from their investment. At time of writing, the stock sports an attractive 4.43% dividend yield, which is capable of growing at a rampant rate in the years ahead as the company doubles-down on its expedition into the wireless arena with Freedom Mobile.
At time of writing, the stock looks absurdly undervalued at just 8.1 times EV/EBITDA and 2.1 times book, both of which are lower than that of the stock’s five-year historical average multiples of 9.2 and 2.3, respectively.
Given that Shaw is in a position to continue to disrupt the Canadian wireless industry as new telecom tech (including 5G) is rolled out, I find it undeserving that the stock trades as though it’s taking the role of the disrupted.
Reverse head and shoulders pattern could imply a move past $31
To make the Shaw story even sweeter, a reverse head and shoulders (H&S) technical pattern looks to be in the works that, if successful, could bring the stock back to all-time highs levels just north of $31.
The neckline lies at $28, and while the pattern may not fully come to fruition, I do think Shaw’s recent post-earnings optimism could be the rally fuel that Shaw needs to finally break out of its funk.
The company also announced its intention to repurchase approximately 5% of outstanding class B shares, which appears to reinforce my belief that shares are severely undervalued given the continued momentum at Freedom Mobile.
Shaw has it all. A large dividend, a promising long-term growth story, and a rock-bottom valuation. And the cherry on top of the sundae is the potential H&S technical pattern, which could see Shaw roar loudly over the coming months.
It’s time to buy today before the price of admission goes way up.
Stay hungry. Stay Foolish.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Joey Frenette owns shares of SHAW COMMUNICATIONS INC., CL.B, NV.