Trading Diary

Trading Diary – 19 June 2019

Today we sold one stock in the Materials sector and allocated the released cash to a share in the Financial industry. This new position is the only exposure we currently have to the Financials sector; however, it is unsurprising given the recent strength of the sector that we are beginning to see opportunities appearing there.

Following these transactions, we will be holding a total of 19 positions.


Ramelius Resources

Sold for a loss of 13.6%

We bought RMS on a pullback to the 50 DMA. The Aud gold price was also pulling back at that time and threatening to break lower, below support. This pullback proved to be temporary as the gold price broke higher, showing considerable strength to take it back to the top of the trading range and above.

A pullback followed the breakout to the top of the range and then another strong breakout.

The RMS price had mirrored the price of gold quite closely and even broke higher when the gold price did eventually break out its trading range. However, this proved to be short-lived.

The company issued an update to the market that showed higher production costs as well as lowered production expectations. The stock quickly reversed back into its previous trading range. The buying support that previously existed for the stock inside the trading range has disappeared, which, compounded by considerable selling volumes, have resulted in our decision to exit from the position.


NIB Holdings (NHF)

NHF had been in a trading range since late-2017 that oscillated between $5/5.50 AND $6.90 with multiple tests of the support zone.

With the surprise reelection of the coalition government, the stock showed considerable strength and raced to the top of the range. A brief pause and pullback to the resistance level followed this.

Last week the stock broke again above the resistance and out of the trading range and now appears to be resuming its uptrend.

Both NHF and Medibank (MPL) have performed well over the last 6 and 12 month periods. MPL is the larger of the two companies with a market capitalisation of $9.4B compared to $3.4B. Both companies share very similar valuation metrics. However, while MPL’s quality metrics such as gross profit and ROA are currently higher than NHF’s, they appear to be deteriorating while NHF’s have been improving.


LTM – 1
1 Yr EPS Growth %11.6

Gross Margin % [LTM]17.9Gross Margin %17.4
Asset Turnover [Latest]1.6Asset Turnover 1.6
ROA13.8%ROA 13.0%


LTM – 1
1 Yr EPS Growth %-12.2

Gross Margin % [LTM]25.5Gross Margin % 25.9
Asset Turnover [Latest]2.2Asset Turnover 2.2
ROA17.6%ROA 20.1%

By Danny Sandler

Founder of Ocean Asset Management.