The AGL (ASX:AGL) share price is at all-time lows. Here’s why this fundie still thinks it’s poor value

Buying beaten down shares that are still falling is often compared to catching a falling knife.
The post The AGL (ASX:AGL) share price is at all-time lows. Here’s why this fundie still thinks it’s poor value appeared first on The Motley Fool Australia. –

The AGL Energy Limited (ASX: AGL) share price is sitting right at all-time lows, currently trading for $5.19 per share.

This comes as shares have plummeted 57% in 2021 during a period which saw the S&P/ASX 200 Index (ASX: XJO) gain 10%.

Does that mean the ASX 200 energy provider now represents good value?

According to Kardinia Capital’s portfolio manager, Kristiaan Rehder, not at all.

Poor value despite looking cheap

The Bennelong Kardinia Absolute Return Fund’s long/short strategy enables the fund to go long ASX shares it believes will outperform and to short stocks it believes will lose value.

Speaking to The Motley Fool last week about why the fund opts to include shorting in its strategy, Rehder explained:

The short book enhances the investment universe that we can invest in.

Most long only funds will usually put their pen down and stop the investment process when the fund manager identifies too many red flags in the company they’re analysing. With our strategy, we can continue working and potentially profit from that trade by going short.

As for the AGL share price being good value, Rehder said (as reported by the Australian Financial Review):

We have been short AGL for some time. We believe the company is facing structural challenges and is poor value despite looking ‘cheap’. It has faced headwinds from lower electricity prices and margin compression in the gas business, and we estimate more than 80 per cent of current generation is from baseload coal-fired power stations.

AGL is undertaking a demerger later this year, but we don’t believe either of the two demerged companies will have a particularly strong balance sheet. Having said that, the share price has suffered a material de-rating, so we have reduced the size of our position accordingly.

AGL share price snapshot

The AGL share price really began to come under pressure way back in May 2017. At that time shares were trading for $27.13. Since then, the AGL share price has plummeted 81%.

More recently, shares are down 16% over the past month.

The post The AGL (ASX:AGL) share price is at all-time lows. Here’s why this fundie still thinks it’s poor value appeared first on The Motley Fool Australia.

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More reading

Own AGL (ASX:AGL) shares? Is Australia’s biggest emitter taking climate change seriously enough?

These ASX 200 shares could be set to face fresh pressure over climate action

What is the current AGL (ASX:AGL) dividend payout ratio?

What’s going wrong for the AGL (ASX:AGL) share price in November?

Why is the AGL (ASX:AGL) share price underperforming Origin lately?

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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