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Monday, 30 April 2018
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AMP Oversold

Catherine Brenner the chairman of the AMP along with some other board members have left with the board taking a 25% pay cut. The CEO brought forward his departure a couple of weeks ago. They have their AGM on May 10. They make a formal submission to the Royal commission on May 4 in response to last week’s revelations about “Fee for no service”.  Management change can often be the catalyst for a share price recovery. The stock is now on a 10% yield assuming forecasts are correct, and a PE of 11.7x with a steady return on equity of 13%. It is trading 31% below intrinsic value. It is down 26% from its year high, down 6.5% in a week and down 15% in a month. It is trading 21% below the average broker target price (see below). It is clearly in a sentiment hole which is more opportunity than a reason to sell now, that moment has almost certainly passed. Technically you might wait for the share price to start a rally before catching the knife, but with an RSI of just 10 (!) this is a hugely oversold stock. Not sure you would be confidently buying it as a long-term investment, this episode could well feed through to brand damage and earnings downgrades so it is probably more a short-term trade when it bounces, let’s see if the management changes today impress anybody.

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