It is well documented that old school media has been struggling for years. Print and TV has been doing it tough in the digital age. Fairfax Media (FXJ) has seen its share price drop from near $5 to about $1 in the last 10 years. The bright spot in the FXJ stable has been Domain. Because the rest of the business has been a drag on the FXJ valuation, the company is now looking to offload Domain in a demerger to shareholders. Regardless of whether this is good for shareholders or not, we can see some interesting developments in the FXJ share price.
FXJ is looking neutral for now but that can turn positive very quickly. The stock has been trading in a large rectangle for nearly 3 years now. Because it has been doing that for so long, it means that when it breaks out, it will rally very strongly. But it is too early to jump on board. If we see FXJ break out near $1.05, then it should swiftly head towards resistance near $1.35. Until then it is still range bound, but one worth watching. Because of structural headwinds, we view this more as a potential trading opportunity than a longer term investment.
Michael Gable is managing director of Fairmont Equities. Any advice is general only. Fairmont Equities uniquely combines both fundamental and technical analysis. Visit www.fairmontequities.com to access our free blog and educational videos.