Haha...I can't guarantee my predictions will be right everytime. I just measure things in terms of risk. SHV may not give you 100% in a few days time, but I believe that it does have a bright future and the market is over-reacting to some news.
The 1H'16 report of this share will be announced on the 25th of this month. The report may help the share price, but I'm not counting on the report alone to give me the returns. By buying this share, I'm betting on a few things essentially:
1. Westernisation of Asian diets - Chinese are now eating 100g per year on average of almonds, whereas in Australia is closer to 1 kg/person/year on average. Almonds are touted as health food and is getting as an ingredient into more and more products. Even almond oil is being explored now in terms of health benefits. So, demand will continue to grow.
2. Supply won't be easily expanded in California and over-reliance of global supply from California is dangerous. Buyers of almonds may want to diversify to Spain and Australia. Supply in California will be constrained by water availability. Moreover, 'fresher' almonds could be obtained from Australia as the harvesting period is ~6 months difference as compared to USA.
3. Almond prices won't crash as seemingly touted in the press. The fall in price recently is a correction. Almonds are not like iron ore whereby you have to spend massively on capex in order to get to production. Almond farming in California consists of thousands of farmers and those that are efficient will make money and survive the downturn, those that don't have access to cheap water supplies and not 'lucky' will just die away. So, the balance of supply and demand will be more efficient. Any surplus in the system should be easily taken out of the system. The pockets of the small farmers won't be as deep as corporations and won't be able to hold out for too long in the event of surpluses.
Let's see if my bet will turn out to be good or a bad one, if it's good, I'll get some extra profit. If not, then I would just have learned a valuable lesson. It's not going to make or break me as an investor.
SHV Price at posting:
$4.68 Sentiment: Buy Disclosure: Held
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