FoundryStrat Trading Idea: Mercia Asset Management

Stock: Mercia Asset ManagementMarket Cap: ~£125mSector: Private Equity / Alternative Asset ManagementTheme: Discount to NAV + Spring Reversal Setup

🎯 The Setup – “Spring” Reversal

We’re looking at a classic spring-type structure:

• Price undercut a prior low

• Immediate rejection of that breakdown

• Buyers stepped in with intent

• Now reclaiming structure

This is typically a sign of:

• Weak hands flushed out

• Liquidity grab completed

• Accumulation underway

The trade is structured around that rejection holding.

📍 Entry & Risk

• Entry: ~26p (accumulation zone)

  • It's not a perfect entry - we entered just before the close on the trigger day. Just after the close, the price actually moved back below the breakout. We held into the next morning and it did start to move in our favour.

• Stop: 7% below entry - below the prior low point.

• Target 1: 33p (recent highs / resistance)

• R:R: ~2.5x

• Execution: Look to get SBE (Strong Breakout Entry) confirmation and trail stop on strength

Once we get momentum through minor resistance, we shift from static stop to trailing structure-based stop.

💰 The Fundamental Overlay

This isn’t just a chart:

• NAV: >43p

• Current price: 26p

• Discount: ~40%

The gap likely doesn’t fully close — small-cap PE rarely trades at NAV —but even partial mean reversion toward 33p delivers the trade.

Catalyst potential:

• Portfolio exits

• Improved sentiment in UK small caps

• Narrowing discount narrative

⚠️ Position Sizing

This is a £125m market cap company. Liquidity matters.

• Avoid size that distorts execution

• Scale in rather than lift aggressively

• Respect spread (it can be up to 5%, so be careful - your broker should get you a much better price than that.

This is a tactical swing, not a core position. .

🧠 Trade Logic Summary

• Technical spring = exhaustion of sellers

• Deep NAV discount = asymmetry

• Clear invalidation (7% stop)

• 2.5R to first logical level

• Trail stop if momentum confirms