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13/02/16
13:30
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Originally posted by researchandwin
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I am by in no way targeting you specifically. So I shall apologise in advance if I do offend.
A number of your comments embody the problem here in A2M land.
Hotkey cops the title of 'Downramper' - the bane of all stock flocks. I am yet to read all his posts, so I shan't comment on the level to which he went to, to get himself banned. However, I have read some of his posts and like me he has raised 'genuine' concerns with the long term prospect of A2M's growth. Funny enough it is the same concerns being shared by insto's and hence is the reason they have not been buying A2M.
I have a golden rule when investing. If you can't find a good reason not to by a stock, then your not being objective enough. Trading/Investing is about risk management. In order to manage risk you must be immersed in understanding all the risks and what may trigger them. If you choose only to focus on the positives, then you will leave yourself open to an event or trigger that others were expecting but confuse the hell out of you.
I also have another golden rule. Bank profit. It is simply inexcusable to watch a stock rise more than 4x in a short period of time and not lock in profits. Those who did not take profits last Friday/Monday are in my view absolutely nuts. It was always going to retrace, as it will post the days high off the back of Feb17 results.
Valuations is another area within the vast majority of people remain clueless. Yes A2M is pumping out some fantastic growth numbers, but A2M can't pump out those growth numbers in supply once they have reached capacity. At the moment you are paying valuations 3 years in advance on high growth rates and over 7 years in advance on more reasonable growth rates. This of course is based on the business model now. That can quite easily change with a significant supply deal. It can also change to the downside with the cancellation of a supply deal. My point and the point of many others who have invested successfully in commodity cycles and bubbles before is simple. It will always come back to valuations and achievable growth rates.
A2M executives have banked profits on 10million out of their 27million pp shares. Out of the 17million left, nearly 1/3rd of them are owned by a board member (so he can't sell).
Those long term A2M investors should have pockets stuffed full of cash. I cringe at the words 'just topped up' or 'just averaged down'.
For those of you who are delirious enough to put A2M in the 'Bear Market' or GFC proof stocks, I have this to say. Value in a Bear market are Company's who are at or below cash backing who are cash flow positive through to growing Company's with PE's of less than 5. Company's like A2M normally suffer declines beyond what they deserve, because of capitulation circumstances. Take a look at one of the golden performers of the Tech Bubble 'CPU' - Did the long term prospects of CPU play out - Absolutely. But it came back to a reasonable valuation first.
As I keep re-iterating. I believe in A2M's potential. But I am a realist, not a sheep.
To put things in perspective - BAL are now back to where they were the day before their guidance upgrade. Note BAL operating at a lot higher EBIT margin.
BAL market cap $1.08billion - forecast EBIT $38million
A2M market cap $1.17billion - forecast EBITA $37million
I expect A2M's Feb17 announcement to be very bullish. I also suspect the sheep will reward it with a share spike. I am confident of what comes after the spike. Unless of course the Company provide solid commentary on how they are going to address their supply restrictions.
I will wear my badge as an A2M downramper (who holds free carried shares in his SMSF) as a badge of honor.
PS,
I note the infestation of new people on the A2M thread. The old saying about the "taxi driver giving you share advise" is ringing louder and louder each day.
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There are various reasons to be negative/cautious about A2. These include:
1) US expansion failure
2) US expansion costs (7m a year for 3 years)
3) UK expansion failure
4) Regulatory changes regarding the export of IF to china
5) Slowing growth in IF and competitive offerings from rivals which steal market share.
6) Negative findings regarding A2 protein.
7) Production constraints.
Now, I believe I have covered the risks and downsides of an investment into A2m more then hotkey has in 200 posts. I have no issue with people sharing these concerns (as these points concern me) although most people here disliked hotkey for his uninformative posts and deflamatory arguments with other HC member.
I agree with your point on banking profit although this may be a better idea after a CGT discount is available (12 months of holding).