Nice article at Motley Fool Recently, shares in Bellamy’s...

Nice article at Motley Fool

Recently, shares in Bellamy’s Australia Ltd (ASX: BAL) and Blackmores Limited (ASX: BKL) crashed 10% in a single day over new import taxes and regulations in China potentially affecting sale of their products. Some in the market opined that this was bad news for the businesses, although Bellamy’s released a statement a day later saying that the fears were unfounded.
The trouble was that many investors overreacted, selling their shares after the initial media coverage and without considering the likely impact on the business.
When tins of Bellamy’s formula are selling for four times their shelf value on the ‘grey market’ in China, is an 11% tax likely to have an impact on ‘official’ (off-the-shelf) sales of Bellamy’s products?
Another key fear was apparently that Bellamy’s products were no longer eligible to be sold in China. Given that it took nearly 10 years to achieve the China-Australia Free Trade Agreement (ChAFTA), how likely is it that China would suddenly ban all baby food and vitamin imports?
Stranger things have happened and China has a track record of industry protectionism, but on balance it appeared likely that the impact on affected businesses would be minimal. The trouble was that some shareholders believed that analysts and media pundits knew something they didn’t, and abandoned ship. The market is reasonably well informed, and if you haven’t done your research you are vulnerable to being caught out in this manner.
However, in this (and most) situations, everything investors needed to know was in the public domain. The Motley Fool’s head of research, Joe Magyer, on the basis of publicly available information, told members as far back as 29 March 2016:
“Is the demand for Bellamy’s infant formula in China likely to be impacted? We don’t expect by much, and even less than the 7% hit the shares took today.”
Don’t make the same expensive mistakes that cost me and Blackmores/Bellamy’s shareholders so much money. If you’ve done your research, it’s pretty unlikely that the market knows something you don’t.


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