Many ASX investors are feeling lost on what to do with the market walking into the reporting season on a tightrope.
There's a lot at stake as we will find out if the big rebound in the S&P/ASX 200 Index (Index:^AXJO) from the COVID-19 sell-off in March is sustainable.
While no one can predict with any certainty how the August reporting season will play out, there's one thing I've done to prepare.
Shoring up your cash
I've sold some of my ASX stocks recently to shore-up my cash position before companies hand in their profit report cards for review.
I was holding very little cash as I had been aggressively buying the market when it crashing earlier this year from the pandemic.
If you don't have much in the cash tank currently, it won't be a bad idea to take some profit with the market trading around a four-month high.
ASX buying opportunities
I say this not because I am a market bear. If anything, I think ASX shares are more likely to soldier on than capitulate.
But I suspect the August reporting season will present some interesting buying opportunities that you won't be able to capitalise on unless you are packing a bit of firepower.
There are also some sectors that I think you could be using as a funding source too. The fact is, some of these ASX stocks have rebounded nicely as we emerged from the nationwide lockdown on faith of a V-shape recovery.
Funding sources
But the resurgence of COVID-19 cases in Victoria and New South Wales highlights the risk that some ASX shares could face downward pressure in the near-term.
It isn't only the two Australian states that serve as a poignant reminder. Several countries, including Japan, are battling a second wave of infections, while the worst affected like the US and Brazil show little signs of getting on top of their rampant outbreaks.
This means stocks leveraged to global trade, such as the Brambles Limited (ASX: BXB) share price, could issue a sombre outlook with its results.
More write-down pressure
Another group that could disappoint are property stocks. A number of these landlords have recently written down the value of their assets due to the COVID-19 impact, but I think some are at risk to having to devalue assets again.
One possible disappointer is the Mirvac Group (ASX: MGR) share price. While management cut the carrying value of its retail properties by nearly 10% last month, it upgraded the value of its office properties.
The move runs contrary to growing signs of an office glut in our two biggest cities and reports of weaker demand in the COVID new normal.
It's also worth noting that 9% of Mirvac's office leases expire in FY21 with a further 8% in the following year.
Questionable ethics
Meanwhile, one stock that might be worth taking some profit on is the surging Kogan.com Ltd (ASX: KGN) share price.
The online retailer, which is a star performer during the coronavirus lockdown, was found guilty by the Federal Court of using dodgy sales tactics.
History has shown that if a company doesn't care much for its customers, it will treat shareholders much the same.
Further, sales growth could be hurt if customers stop trusting Kogan to offer them a fair deal.
