ZEL - Z Energy.

[King1212]

Beagle..great post...what do u think is a good entry for ZEL? Thanks

[Beagle]

Beagle..great post...what do u think is a good entry for ZEL? Thanks

Thanks. Very difficult question because the narrative could easily change quite significantly at any point, just as it did quite recently with their latest profit downgrade.
The company has had a history of disappointing the market in recent times which does make me wonder a bit about how good their reporting systems are.
What was clear from the most recent update is that ZEL is right at the very bottom of its guidance range and meeting the bottom of same is contingent upon no further erosion in margin.
My opinion - Further erosion could occur through:-
More intensive discounting by their competitors
Their own discounting scheme which only recently allows stacking of retail discounts at both ZEL and Caltex stations
Their own ZEL app
Regulatory intervention

Volume could also be eroded and Gull for instance are known to be trying to muscle in on their Jet fuel supply contract at Auckland airport.

Capital will be required for new expanded jet fuel supply storage in South Auckland or the Govt have said they will intervene / regulate to ensure an added margin of safety with critical fuel supply.

Recently I had thought mid $4's might be a good entry point but my strategy is to now wait until a bottom is into the share price and a new uptrend has commenced.
Its risky to buy into any confirmed downtrend and try and bottom pick and ZEL is making new multi year lows for good reasons. The compression in margin, especially, and loss of market share are quite significant factors in my view with the potential to make themselves felt quite significantly more.

ZELCHART.jpg My plan is to follow the technical's with this one and open up a half sized position in due course when the share price breaks up through the 30 day moving average, (red line) and double down on that if it breaks up through the 100 day moving average (black line).

ZEL's history of surprising the market and the unknown extent of any possible regulatory risk makes this a very risky stock to try and have a predetermined buy price. Hope that helps. We're only 12 days out from the fuel study release (5 December) and a short time thereafter we should see an announcement by the Government on what they propose to do about it, if anything. Makes sense to wait and see what happens in that regard, in my opinion.

[peat]

Yes appreciate your thoughts Beagle, but please, go out and enjoy some sunshine on this lovely weekend day

[couta1]

Be Greedy when others are Fearful.

[RupertBear]

Be Greedy when others are Fearful.

You backing up one of your trucks again Couta!

[winner69]

We have takeoff

Shareprice wont be this low again ...maybe never

[Beagle]

Be Greedy when others are Fearful.

That famous saying of Warren Buffet is a good one for situations where there is genuine market panic and fear.
In my view that's not the case here. The market appears to be rationally marking the stock down steadily to reflect the declining fundamental's of the business and the extra regulatory risk. If they keep losing market share and retail margins are eroded further either through regulatory intervention or competitive pressure, then its likely to head materially lower. That's why I've referred to this one as a classic value trap. Its looks cheap, but the bitter taste of poor quality lingers long after the thrill of an apparent bargain.

[couta1]

That famous saying of Warren Buffet is a good one for situations where there is genuine market panic and fear.
In my view that's not the case here. The market appears to be rationally marking the stock down steadily to reflect the declining fundamental's of the business and the extra regulatory risk. If they keep losing market share and retail margins are eroded further either through regulatory intervention or competitive pressure, then its likely to head materially lower. That's why I've referred to this one as a classic value trap. Its looks cheap, but the bitter taste of poor quality lingers long after the thrill of an apparent bargain.

Just do it.

[Beagle]

Just do it.

Who can forget the Prime Ministers recent outrage that motorists are being "fleeced" and we're going to do something about it !! (Don't forget its an election year next year so its all about being seen to do the right thing irrespective of whether motorists really are being fleeced or not).
5 December 2019, mark it down in your diary for the final fuel study release and the Government's response shortly thereafter.
A pretty obvious and significant headwind I would have thought...

[couta1]

I actually did take a decent punt this time last year (with no chart of FA support) and bought a decent stake at $5.20 and did well out of it.
My sense is the fundamental's have deteriorated quite significantly since then. To make another bold call like that I'd need to see the share price quite a bit south of where it is today.

And let's not forget who gave you the tip off at that point, remember the phone call.