Trading Diary

Trading Diary – 24 January 2020

We’ve opened a new position in Polynova Limited (PNV). Following this purchase, we have effectively two free spaces in our model portfolio for new investment opportunities. The model portfolio is currently holding a total of 16 stocks.


Polynova Limited (PNV)

Polynova is a medical device company that develops and sells dermal regeneration solutions for the treatment of burns, surgical wounds, and negative pressure wound therapy. The company offers BTM (biodegradable temporising matrix), a wound dressing intended for the treatment of full-thickness wounds and burns.

The company also has several other products under development including for the use in hernia treatment and breast augmentation and reconstruction.


PNV has been trading in a range for the last 20 weeks since late August 2019. The stock broke below the bottom of this range briefly in October and November before sharply reversing course in mid-December upon announcing Novasorb BTMs approval for sale throughout the UK/ Ireland and the EU.

The stock spent the next five weeks bouncing along the bottom of the range as volume all but dried up. Increased trading volume returned to the stock in the first three weeks of 2020 and promptly propelled the stock back up to the top of its range. A high volume breakout to new highs followed this action after the company announced its first sales in Europe.

The stock is now at 52-week highs. A pause at these levels is warranted given how quickly the stock has moved up. However, a decrease in volume should accompany this pullback. The stock should also hold above, or at least in the top third of the prior range. This technical price action would indicate that the stock is under accumulation and a potential new uptrend is underway.


PNV is an early-stage growth company. Sales have just recently kicked off in many markets and growth is accelerating. FY18 BTM sales were $1.7m, and $3.7m for the half-year 31 December 2018, but by year-end FY19 they were $9.3M.

At the AGM the chairman announced that in the four months to October 2019 the company is more than 100% ahead of the four months to October 2018. He went on to say that they are seeing month on month growth, with October 2019 BTM sales more than 100% higher than October 2018 sales.

At this stage in its lifecycle, the company is likely to eschew short-term profitability in favour of growth. The size of the opportunity is considerable. Therefore cash flow will be ploughed aggressively into growing the global sales teams, new product development, and expanding manufacturing capacity.

Never the less, the company’s cash burn is declining as sales expand. The company has stated that they do not need new equity for short term working capital. They’re confident that newly hired sales and marketing staff can quickly pay for themselves and generate returns. However, they may still consider a capital raising for R&D and manufacturing expansion.

By Danny Sandler

Founder of Ocean Asset Management.