share price discussion

New to HC and have been watching the lively CNP discussions with great interest over the past couple of weeks (apologies mods, know you’d prefer not to start post with waffle).

There are obviously some very dedicated people on this thread and the speed and quality of some of the information flow and analysis is impressive.

I was reminded to have a look at CNP due to this forum and after doing some research and taking a view on the a) risk profile and b) underlying business, made a modest investment (or punt I think would be more appropriate at this stage).

I guess anyone who came in the last couple of weeks did so knowing that they could lose their money and I am in this group.

In terms of where the share price is headed I urge people to take a pill and think about the basics for a minute.

Consider that the broader (all ords) market is still 18% off its peak at the end of October, so forget $10, $8, $6 numbers for CNP in the medium to longer term, that ship has sailed. Even in perfect health the company would not be trading near those numbers in the current market.

Whilst there are companies that are headed back to (or passing) their highs, for example BHP and FMG these are few and far between from a broader market sense and in the case of the examples given, have specific reasons for their price strength.

Centro is still a distressed group, with the banks now crawling all over it, this will to some degree hamper management as it tries to move forward, because in effect management won’t be able to fart without asking the banks first. This in itself will mean that things take longer than they normally would. Having said that I take comfort from the outcomes that GR has achieved to date and I believe that he will drive the business repair work aggressively.

Whilst it’s obvious that the December 15 deadline is what all parties have in principle agreed to, there are still some technical issues to get through by 30 May. I note that the wording of the announcement uses the word “may” a lot around this (e.g. “arrangements may be terminated”) which means that the parties can still all agree to continue on even if the 30 May stuff is not finalised, this also gives some (small) comfort.

Large investors will (must) look at these technical issues because they add significant risk, and even worse they add widely known risk. This means that the big investors and particular fund managers etc who are investing other people’s money, will need to be very wary until these risks are taken out. This will continue to have an influence on the share price.

We are nowhere near out of the woods from a credit market perspective; there are plenty of people who will tell you that we are currently in the midst of a sucker’s rally so market shocks generally will also be a factor in the banks comfort level between now and December 15.

Who knows what some further bad news from the US credit, housing, retail markets will do to the bank’s comfort levels over the comings months?

In terms of the day to day share price going into the months ahead, who knows really?

As you can see from the contributors to the HC discussions, investors / traders / punters as a group include some people who think about what they are doing and do their research etc, but the group also includes a lot of people who make as much sense as a bag of doorknobs. This is why share prices and the market generally can be so irrational.

You've all seen how poor even the analysis and presentation of the "facts" from a lot of the media outlets is so they are not a lot of help either.

I’ll conclude by saying that I’m in this with a long position and would love to see the share price take off. However putting aside short covering rallies (today perhaps?), irrational punting etc, it’s the fundamentals and risk profile of the underlying business that will matter.