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Important Notice - Scam website
Important Notice - Fraud awareness
The vast majority of retail investor accounts lose money when trading CFDs / Spread betting with this provider.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail investor accounts lose money when trading CFDs / Spread betting with this provider. You should consider whether you understand how CFDs / Spread betting work and whether you can afford to take the high risk of losing your money.
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    National Grid share price: NG’s defensive qualities

    One of the traditional strengths of companies in the utility sector is that they are dull and dependable. Unfortunately, the aftermath of the COVID-19 has left few sectors and even fewer companies unaffected, whether positively or negatively.

    Earlier this year there were signs that things were going to get stirred up for the National Grid share price. This was going to be both a fundamental and technical basis, and underlined by the way that the stock fell from a 1,073p peak in February to a 789p floor in March in the wake of the first lockdown.

    The 25% decline was only slightly less than the one third plus declines for stocks in most sectors, and clearly disappointing for those on board National Grid shares for perceived defensive qualities.

    While the stock has retraced to the middle of the range near 950p since the spring, the newsflow since then has underlined the way that the sell off earlier this year was justifiable, if only on the basis of the various headwinds affecting the National Grid share price.

    Learn more about shares trading with us

     

    National Grid shares debt level

    Perhaps the first point to note is that with net debt at £30.1bn and set to rise to £31.6bn by the second half of the year, we are looking at a company which is swimming through treacle in terms of its cash position.

    This point was emphasised in the wake of the latest first half underlying operating profit which fell 12% to £1.1bn.The excuse for this was said to be the impact of COVID-19 related costs, expected to hit £400m for the full year.

     

    The fundamental elephant in the room

    However, tough as the present environment has been, it may be that there is a fundamental elephant in the room. This aspect makes such near term earnings and debt issues as relatively insignificant.

    The risk for the National Grid share price is that in order for the UK Government to achieve its net carbon neutral goals it would break up the utility. The problem is the conflict of interest for National Grid in being the Electricity System Operator, as well as owning the network.

    The question is whether in order to get to the carbon neutral destination, a more drastic action than having legally separated the ESO three years ago is seen as enough?

     

    National Grid shares £400m profits miss

    Perhaps more important to focus on though is the £400m miss on profits this year, and rather than a breakup, a lower allowed profits return for National Grid shares would be far more damaging. Trumping all of these factors though, may be how National Grid decides to treat shareholders.

    In a year when one of the worst aspects has not just been National Grid share price falls, but dividend payouts being cut, investors are most likely to focus on how much National Grid shares yield.

    Having raised the payout on a full year basis, and being likely to repeat the gesture at the interim stage as well, it may be that holders of NG shares remain loyal until the big picture issues surrounding the company are finally resolved.

     

    How to trade National Grid shares

    Open a live or demo account with ATFX to get started today. Trade shares on leverage, take up a long or short position when trading with CFDs and make potential gains from price movements.

    1. Register for an account or log in to your existing account

    2. Open MT4 either on your desktop or mobile

    3. Search for National Grid shares in the market watch or symbols window

    4. Choose your position size

    5. Hit buy or sell, and then confirm the trade

     

    NG shares daily chart

    Daily chart analysis showing National Grid share price daily movements for 2020

     

    Looking to learn trading strategies to boost your trading? Check out our Trading Education Center.

    Take the opportunity to develop your trading skills with our free educational resources. Find e-books, in-depth trading courses, MT4 platform guideline videos, trading strategies and more.

    Last Updated: 16/11/2020

    This market commentary and analysis has been prepared for ATFX by a third party for general information purposes only. Any view expressed does not constitute a personal recommendation or solicitation to buy or sell as it does not take into account your personal circumstances or objectives, and should therefore not be interpreted as financial, investment or other advice, or relied upon as such. You should therefore seek independent advice before making any investment decisions. This information has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. We aim to establish and maintain and operate effective organisational and administrative arrangements with a view to taking all reasonable steps to prevent conflicts of interest from constituting or giving rise to a material risk of damage to the interests of our clients. The market data is derived from independent sources believed to be reliable, however we make no representation or warranty of its accuracy or completeness, and accept no responsibility for any consequence of its use by recipients. Reproduction of this information, in whole or in part, is not permitted.


     

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