Chart Update, page-1227

Congrats SmugLex on your purshase!

It's hard call to make whether to sell now or wait. I have spent a few restless nights trying to get a feel of why the SP has been moving down on no real news.

Sure, it could just be a PE compression which has happened with other high PE stocks. This can be a gradual rerate, but as we approach technical support points, it seems some are panicked that such a rerate could get overshot and really damage the SP. After which TA people will argue that kind of damage will impact the SP recovery for quite some time, despite any changes in fundamentals. We have seen this before to some extent with A2M when it rose to low $2s in December 2015 and then technical support broke around that $1.60 mark which led to all kind of panic selling to $1.20s. The recovery was relatively quick, but it took further time for the recovery past previous highs. I think there are too many eyes on A2M for it to overshoot too long on the downside.

Another theory I have is there has been close correlation of A2M's SP with the devaluation of the Yuan. The Yuan devaluation has been due to potential damage from trade wars between US and China. Any changes to domestic economy confidence in China may impact purchases of premium foods. Not sure how long before we get much resolution on that front.

Another theory, is that there is some nervousness with the new CEO. Will she be aggressive? Will she reset expectations for investors on her first FY report to make life easier for herself? High growth is now expected. The days of overly conservative forecasts may not go down well with investors any more as they are paying a higher premium than ever for the growth rate.

So the SP is vulnerable temporarily until we get further news from FY report in August. I think there should be enough information on the growth pathways in that report to get investors to view the glass as half full, again. Also within 4 months we should just about get the 3/4 months update. That should be a cracker after the marketing spend in the last Q and the stocking of all these new MBS stores as well as 11/11 pre purchasing. It should show we are tracking at a run rate of $1400M for FY19.

Of course any of these reports could show the opposite. Investors/analysts may still be spooked from the unexpected label destocking issue. That was A2M's first slight misstep in 3 years. But for me, that misstep (and a slightly lower growth rate) has been priced into the stock already as analysts have made their adjustments some time ago and the market has digested them.