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Trading Diary

Trading Diary – 4 March 2020

We’ve further reduced our exposure to the stock market today with the sales of BWX (BWX) and Credit Corp (CCP). Our cash allocation has increased to 50% in the Model Portfolio, and we are now holding nine individual stock positions.  

Both stocks had been acting well until the beginning of this latest bout of volatility related to the CONVID-19 virus. However, both have now broken below stop-loss levels, and as a result, we have sold. 

The market is now in a downtrend; therefore, we will not reallocate the cash released from these transactions back into new companies. 

Our strategy is designed to participate in uptrends and avoid the worst downtrends by eliminating positions and staying in cash while a downtrend persists. It’s not perfect, but it allows us to keep a seat at the table and to keep investing over multiple market cycles.

Sells

Credit Corp (CCP)

Sold for a 6% profit.

The stock has broken below key moving averages, including the 50, 100 and 200-day moving averages. Also, the stock price has fallen below its most recent basing point. Trading volume increased significantly during the latest down move. 

The uptrend that began in April 2019 is now over. When this recent bout of selling concludes, we expect the stock to spend some time in consolidation. At this stage, it’s unclear whether this will turn out to be a reaccumulation range or a distribution range. How the economic impact of the virus affects the company’s earnings and profitability (if at all) will ultimately determine the stocks next move. 

BWX Limited (BWX)

Sold for a 10% loss.

BWX is a similar story to CCP above. The stock has been unable to stay above key moving averages (although it remains above the 200-day) and has now fallen below its most recent basing point. Volume was elevated over the last two weeks since the release of 1H20 results and remained so this week. 

While fundamentally, the stock was on track to deliver, with revenue growth and margin improvement providing a powerful combination. However, improving operating metrics has not been enough to counter negative newsflow relating to the CONVID-19 virus. 

Companies exposed to the global consumer will be under pressure while significant uncertainty relating to the virus persists. As a result, we have moved to the sidelines for the time being.

By Danny Sandler

Founder of Ocean Asset Management.