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Motley fool

Why a2 Milk Company Ltd (Australia) shares sank 8% lower today
James Mickleboro | November 1, 2017 | More on: A2M



In early trade the a2 Milk Company Ltd (Australia) (ASX: A2M) share price had a terrible start and sank over 8% lower to $6.98.

It has since rebounded and is lower by just over 3.5% to $7.34.

Why did its shares sink lower?

With no news out of the company or broker notes to speak of, it is likely that investors have been spooked by a change in substantial holding announced yesterday afternoon.

According to the announcement, Colonial First State Asset Management has trimmed back its holding in the dairy company from a 6.4% stake to a 5.4% stake.

Although no explanation was given for the selling, it is likely that the asset manager has decided to take a bit of profit off the table following its stellar share price gain this year.

After all, a2 Milk’s shares are up well over 250% since the start of the year thanks to impressive sales into the lucrative China market.

Should you buy the dip?

While I think a2 Milk is one of the best buy and hold investment options on the market, I wouldn’t be a buyer at this share price.

At least not until the company has held its annual general meeting later this month. If it fails to deliver a sales update which justifies the recent share price gains, then there’s every chance that its shares could tumble lower.

In light of this, I think the prudent thing to do is to keep your powder dry and wait patiently for its November 22 meeting