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The only good thing is that China and India are buying up all of the cheap Russian oil, and they have about 2/3rds of the world's population. So it may not matter what the US and the EU say or do...
Thanks. Keep an eye out for the US attempting to cap Russian oil. Could result in retaliation and oil going even higher.
Nice post econ. Always trying to learn more.
The issue with oil in the UK at least is a refinery one. We can import oil, but lack the infrastructure to refine it as we have outsourced it. Therefore, even if oil falls, supply chain bottlenecks with refineries and market structures cause me to doubt if oil (at the pump) will decrease in the near term. As for the refineries, many were hit extremely hard by the pandemic and have used cashflows to simply remain afloat. Investing in oil refineries isn't exactly the most popular policy given ESG and the sector suffers from underinvestment.
On ASOS, I like the business and I have a position around the £8 mark. Although the consumer may struggle, ASOS can leverage their existing product mix to mitigate demand fluctuations and I'm happy holding for the next 5+yrs. When the Pound and inflation returns to normalised levels, I'm confident that the SP will rerate to fair value.
I assume when you say 'zero sum gain', you mean 'zero sum game'?
Therefore you're questioning whether asos can only improve margins if oil goes down?
Predicting the macro is very difficult. I'm not going to pretend that I know the full implications of oil going up or down will have on the economy. But naturally, it makes sense that if prices at the pump fall, consumers have more money in their pocket.
If oil goes down due to demand destruction, then yes that isn't a good sign for almost all businesses.
I think oil will come down, but not solely due to demand destruction. There are many cogs in the machine: demand destruction due to rising interest rates and inflation, China buying as much Russian oil as it can (and easing pressure on demand for ROW oil), possible supply increases (since higher prices will result in refineries increasing supply to try and cash in on higher prices).
Correlation between asos and oil is unlikely to be 100% negatively correlated, but I think there is a relationship there, and in my view an easing of energy prices will ease the pressure on consumers.
In order for energy to fall demand destruction has to occur (unless OPEC increase supply / Russia - Ukraine conflict ends). By the nature of supply issues easing the consumer will be adversely impacted. Is this simply a zero sum gain for ASOS?
Oil comes down, cost of living eases which gives more disposable income for consumers to purchase clothing on the likes of asos. Also, will ease inflation on production and delivery costs for asos, their manufacturers and delivery companies.
How does Crude Oil correlate with ASOS?
Kent, I blocked Ammu. Still has to have a parting shot which is sad and I have no time for.
Back to market talk, WTI crude hovering around $100. Whether we break above or below will likely determine the movement in ASOS short term.
lets move on and I agree. Since he has sold out ASOS I hope he moves on to GLEN.....
Agreed
Quit with the pettiness Kent and Ammu, nobody else cares for your personal vendettas.
RentBoy bought Glen after selling ASOS and first post on the GLEN board...."I've got a bad feeling about commodities" LMAOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO
You can't make up this shyteeeeee
Just because it dropped 80%, it doesn't necessarily mean it's good value.
Not meaning to sound blunt here, but you need to try and find a fair value before you buy a stock. Whether that is doing yourself or using a website, use DCF models to try and understand how the business is currently being valued, and whether you think margins will improve in the future.
I've calculated that asos is currently being valued as if it will earn £30m-£40m in profit each year for the next say, 10 years.
Yes they have guided that they will earn this amount of profit for this year, but this has been mainly due to inflationary costs.
If you think business conditions will improve and asos will survive (I do), then asos will earn a healthy return in the medium term at these levels.
This is the sort of research and thought processes you should have whenever you purchase a stock. Do not just buy because it was down x%, because what will you do when it goes down further? Probably sell.
You don't have to be the best in the market to earn a great return... just don't f*ck up :)
Oil collapsing.....good for online retailers!!
Kent, why did you buy asos? And why did you sell asos?
If you sold simply because the price went down, rather than your thesis changed, I'd argue that's not a good reason to sell.
I bought asos because I believe that the inflation will ease in the medium term, the cost of living will ease, and margins for asos will improve through time. I won't buy or sell on daily movements because I know that if I'm right, the price will follow. If I follow the daily movements in price, I will make an emotional decision that I will end up regretting.
Turning off the news and coming back once a month or so is quite a healthy way to invest in my experience.
Best of luck.
Buy and hold usually works out better Kent :)
Just going to bring this post back up. Oil is now rolling over and I fully anticipate a large rerate to the upside for all retail stocks since the cost of living crisis will be eased.
Remember, buy low (retail), sell high (oil).
Excactly .. it’s time to buy not sell .. investors trading with emotion
Crashing back down, could ease inflation fears meaning this can push higher. Now we just need oil to roll over and should have a green light to push higher. Last time we had a drawdown in the market of this magnitude due to inflation back in the 70s, the 2nd half of the year the market went up about 27%.
Buy businesses that are cheap, not what is currently in fashion (oil).