So I thought I should share my thoughts on the recent announcement by Energy Action (ASX: EAX).
The company has said that they now expect NPAT of approximately $5 million. The supposed reason for this is that the Sustainability Solutions business has grown only about 40% (which shows how optimistic their original forecast must have been).
I'm annoyed with the company for a variety of reasons. First of all, they should be making conservative forecasts. Second, they should have foreseen that Tony Abbott would remove incentives for energy efficiency. Third, the Directors have been selling shares. Fourth, the company has been paying consultants to help it a) restructure is sales team; and b) Expand the Sustainability Solutions business.
What is required is more corporate discipline. Let's hope the new CEO stops the company haemorrhaging cash to corporate advisers and does the job he is (very well) paid to do.
Anyway, so like any good stock market opportunist I dumped 60% of my holding this morning (probably should have dumped them all). Currently, I'm reverting to my old valuations: I basically consider the range $2.80 - $3.35 to be too low to sell and too high to buy. If the share price slips below $2.80, there is an extremely high likelihood that I'll buy shares.
If the share price heads up to $3.50, I'll probably sell half my remaining holding (leaving me with 20% of my original holding).
So what have I learnt?
Well I've learnt that I should probably lighten my holdings when I consider a share price overvalued. However, it is a bit of a philosophical question because as regular readers will know, I've traded in an out of Energy Action before. At the end of the day, this is a learning process.
Should I have sold at $4.20 (prior to the downgrade)? Most likely: one teacher of mine downgraded Energy Action because of the director selling, and I have to say, I was tempted to sell at above $4, because the insiders were selling at $4.
The Author owns shares in Energy Action. Nothing on this website is advice, ever. This post is for entertainment (and for my own reference!)
Sign up to the Free Newsletter to be updated first when I do detailed research.