ASX drops 90pts…weakest day in months
Not a lot to cheer about today with a decent sell off across the board , the only sector to be spared was the Real Estate stocks while the GOLDS also finished in the green… A weak open followed by sustained selling throughout the session culminating in a range of +/- 74 points, a high of 5755, a low of 5681 and a close of 5684, off -90pts or -1.56%.
Source; Bloomberg
It was actually encouraging to see some volatility finally kick back into stocks after an extended period of lacklustre ranges and high levels of complacency. Banks were the weakest link in the US overnight and that trend continued here today with the sector down more than 2%, which provided us an opportunity to take a small (4%) position in NAB, a stock we’ll buy more of if the price falls back further.
This sort of move clearly demonstrates our thinking around the market. Last week we sold Macquarie for a good profit, not because we disliked financials or were overly concerned about Macquarie as a company, US investment banks had enjoyed a very good run up in price courtesy of Mr Trump and importantly, Macquarie has a large exposure to the $US which we turned negative on, again a theme that has started to play out. We also sold CSL and Altium at the same time for similar reasons and importantly to increase cash levels (to 19%) giving us some flexibility if the market fell – which it has.
This isn’t about trading the market for short term gain, but it’s about allocating capital intelligently to makes it work hardest. Our Mantra this year has flip flopped between remain open minded, and sell strength, buy weakness and clearly these two lines have much in common. Last week we sold strength and today we’ve allocated a portion of those funds into weakness.
ASX 200 Intra-Day Chart
ASX 200 Daily Chart
As suggested above, we added NAB to the portfolio allocating 4%, and we’ll increase this if we see more protracted weakness play out in the coming days leading into what we think will be a positive April for the sector (ahead of May dividends).
NAB (NAB) Daily Chart
We also added a small (3% ) positon in Primary Healthcare (PRY) which is more a technically driven position. PRY has had a very tough few years and they’re currently undergoing a major business restructure, that we believe should be the catalyst for a turn of fortune for the company. Additionally, the stock does have takeover appeal as discussed in this morning’s note.
Primary Health Care (PRY) Daily Chart
Have a great night,
The Market Matters Team
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