Rebalancing May 18, 2021: Selling Ecros and buying Resolute Forest Products

SELL: ECROS SA

Today I sold Ecros SA for roughly +63% which I bought (almost) a year ago (June 4, 2020). As of today, it would not make it into my screen again. Here a short description of the business:

It really had a nice run lately and most likely would survive the Momentum Screen (see chart below). However, that and a recent income decline also made it pretty expensive on a EV/EBIT and PE basis. Short: a classic multiple expansion Value trade.

BUY: RESOLUTE FOREST PRODUCTS

To replace the stock I today bought Resolute Forest Products RFP (Canada). Looking at the chart, it is a scary play since it stands at major highs and had a huge run. However, the data suggests that it is a good Momentum/Long-term-Reversal Play.

When put into context with valuation and fundamental momentum, the chart becomes less scary. 

Will it play out? Who knows. Lumber had a huge run and it might collapse as fast as it emerged. Generally, I currently hold no other Canadian or  other Basic Materials stocks, so for me it is a nice diversifying Value play with good fundamental and technical Momentum. It shows no major Red Flags in my Screening process and regarding my switch to 6m rebalancing, there will be a review of the data soon enough.

Cheers,

Non-Prophet