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.

| More on:
sad looking petroleum worker standing next to oil drill

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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 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.

More on Record Lows

Couple look at a bottle of wine while trying to decide what to buy.
Consumer Staples & Discretionary Shares

Guess which ASX 200 stock just hit an all-time low following a profit warning

Higher costs and flat sales are weighing on this blue-chip stock.

Read more »

Distressed man at a casino puts his head in his hands, covering his face.
Record Lows

Star Entertainment shares flop 6% to an all-time low amid critical inquiry

There's a perfect storm of negativity surrounding this ASX 200 casino operator...

Read more »

Businessman using a digital tablet with a graphical chart, symbolising the stock market.
Record Lows

History suggests snubbing the ASX 200 at record highs could be a costly mistake — here's why

It turns out that investing, even at record highs, can be better for your wealth than waiting on the sidelines.

Read more »

sad party goer sitting alone after celebration
Record Lows

Endeavour share price sinks to new all-time low amid ACCC blow

Endeavour might need to rejig this acquisition. Here's why the ACCC is initially not fond of a Rye Hotel takeover.

Read more »

A man thinks very carefully about his money and investments.
Record Lows

What's the lowest Sayona Mining shares have ever been?

The lowest Sayona share price on record is guaranteed to shock you.

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Technology Shares

Why is the Bravura share price crashing 59% today?

The Bravura share price is having a day to forget...

Read more »

Side-on view of a devastated male investor laying his head on his laptop keyboard
BNPL shares

Sezzle shares plunge another 16%, now down 60% in a week

Why have Sezzle shares collapsed to a new record low today?

Read more »

Close up of a sad young woman reading about declining share price on her phone.
Retail Shares

Why is the Step One share price crashing 54% to a new low?

Step One shares are being smashed on Monday...

Read more »