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Trading Diary

Trading Diary -1 May 2019

We made two sales today, one in the Real Estate sector crystalising a loss of 4% and one in the Communications Services sector booking a profit of 8%. Both stocks were a part of the initiating portfolio in February 2019 when we began allocating capital back into the stock market when our trend signals turned green after a period of stabilization, following the sharp declines experienced in the fourth quarter of 2018.

The Real Estate sector was the best performing sector in 2018. As the market has recovered, There has been a general rotation away from the defensive areas including Real Estate into the higher risk sectors like Information Technology and Consumer Discretionary. This rotation is not unusual, and we have adjusted the composition of our portfolios accordingly.

Of the 8 Real Estate holdings that comprised the portfolio in February, we have now sold five of them. These trades have broken even in aggregate. The remaining positions, including Charter Hall (CHC), Goodman (GMG) and Dexus (DXS) are currently showing a profit of 16%, 10% and 4% respectively (not including dividends).

We are currently holding a total of 19 positions.

Sells

  1. Vocus Group (VOC) – 8% profit
  2. GPT Group (GPT)  – 4% loss

Vocus Group (VOC)

The stock has made plodding progress in the last few months. As a result, it is no longer in the top quartile of our primary intermediate-term momentum measure. As a result, we’ve executed a sale of the stock.

Longer-term momentum, as well as several other momentum measures, still look healthy for VOC, in which case this sale might prove premature. However, our job is to execute our strategy consistently, and in this case, this is what we’ve done. Further study of the interaction of the various measures of momentum is warranted.

GPT Group (GPT)

GPT violated its key trend signal. The stock was purchased on a pullback to a previous long-term resistance point, having spent the prior two years in a long trading range. We expected a continuation move into a new uptrend; however, this has so far failed to materialise.

We can see this clearly on the weekly chart, shown below.

Buys

  1. Kogan (KGN)
  2. Austal Limited (ASB)

Kogan (KGN)

After collapsing 73% from March to October last year, the online retailer has once again begun to show its strength and started moving up once again in a more orderly fashion. The company ranks highly for historical growth with most metrics moving solidly in the right direction.

That said, the stock also ranks amongst the most expensive that we currently own, so continued strong operating momentum will be necessary to maintain demand for the stock.  

Austal (ASB)

In January 2019 ASB emerged from a two-year trading range and in April moved back into range of all time highs not seen since 2007. Annual revenue for the shipbuilder has tripled since that time and margins are once again moving in the right direction after years of compression.

By Danny Sandler

Founder of Ocean Asset Management.