It’s not uncommon that a greater degree of net performance is added to a portfolio by cutting a loss as opposed to picking a winner, ELD is shaping up this way for our Flagship Growth Portfolio, we cut our 3% position last month, and the stock’s now almost 5% lower with a break to fresh post-COVID lows appearing a strong possibility. ELD delivered another downgrade last month, it wasn’t overly large in magnitude but for a company that’s struggling to regain investors’ confidence it simply delivered another reason to sell i.e. if in doubt get out!
A downgrade is rarely a good thing, but in the case of ELD, it could slowly be taking the rural business towards a compelling valuation, even for the once-bitten MM. ELD is now trading close to 9x FY24 PER, well below its peers who are closer to 17x – one more bout of bad news and it will look cheap, but for now, the 9% short position looks on point and not to be messed with!
- We can see ELD testing its $5.50 pre-COVID support, and 10% lower hence we are in no hurry just yet to catch this particular falling knife.
MM is neutral ELD at best
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