Game changer

One Steel reported a better than expected profit this morning but the two salient points are no share issue (for the moment) and the outline of areas for growth with both iron ore and mining consumables (whatever that is) performing well. Meanwhile the steel business does not look like it will deteriorate further with cautious improvements mooted although maybe not enough to take the business into the black. I posted about the binary nature of this stock a couple of weeks ago as there's a lot of value if the company does not need to raise capital. I paid 79.5 on the opening and after consolidating for an hour, OST has pushed up to 84 (at 11.42 am).

There's a large element of short covering but it also seems as if the game has changed with the inexorable selling in retail having been short circuited in BBG and PBG by private equity and in smaller resources by the prospect of expansionary policy in China. With OST, the market seemed to forget that they benefit from iron ore and the expansion there could easily add $60 million to profits next year with more to come.

There was some early weakness in AGO and PDN. I bought a fraction more AGO at 310 and doubled the PDN at 170. They've both recovered with the market which is now higher by 10 points.

11.58 I've noticed that share prices behave as if everyone is a momentum player so that stocks with intrinsic value get sold way down if there is no immediate growth catalyst even if their business cycle is thought to be only a year or less from turnaround. Apart from private equity, the only value players seem to be private investors.

2.46 The recovery gathered steam on some positive news out of Europe. The Asx 200 is up 29 at 4285 – down from a spike to 4299 – with flat markets in Asia holding us back.

I was just looking at the FnArena short report. It's a lagging indicator with the latest figures up to Feb 7 but the list is dominated by retailers and a few out of favour stocks like LYC, LNC and OST. It looks like the squeezes are kicking in...these stocks are seriously outperforming the market. For example, JBH up 2.3%, DJS up 2.4%, FLT 3.5%, COH 1.8%, HVN 2.2%, OST 13%, CSR 2.1% and RIO 1.6% compared to a rise of 0.7% in the Asx 200. The only two to be down are TRS and GNS but these are pausing after having run 10 and 15% respectively in the last week.

4.11 The market outperformed the region for once with a strong rise of 35 points helped by good results from DOW, OST and BLY. There seemed to be an attempt to knock OST down on the match but it held on to most of the gains to close at 82.