In trading yesterday, the Seven West Media (SWM) reached the stop loss level of $0.47, and the position is now closed.
It is always slightly disappointing when we exit a position when a stop loss is triggered. Even more disappointing was the fall in the share price following the trading update on the 4th May. In the trading update, they increased EBITDA guidance and painted a positive picture for the future.
One of the reasons we suspect the fall in the share price is the market pricing in the risk of a recession. If a recession occurs because the Reserve Bank of Australia increases interest rates too fast to curb inflation, advertising spend would be one of the first areas where companies look to reduce spending. This would lead to lower profitability over the next few years.
We will watch this stock in the future and look to buy back into as the economic cycle changes over time.
Closed position
Number of shares: 10,000
Entry price: $0.63
Exit Price: $0.47
Result: Loss $1,600
