Well Here we are again
Feel like Deja Vu. Reminiscing the days back in February 2018 when interim and contract with Fonterra ann come out then SP shot up from just above $8 to above $13.
Confident A2 has been performing very well for the last 6-12 months. Looking forward to 1H19 results with stats not only in Australia/China but also Asia mainly US. Europe can also be counted. Obviously SP has been picking up the good momentum for the last month or so with anticipation of these results and clearly Insto started adding up into their portfolio to time with the upcoming moments.
https://www.copyright link/markets/why-the-sequoia-fund-bought-a2-milk-20190129-h1ama1
A2Milk is one of three new stocks added to a concentrated and highly regarded49-year-old global portfolio known as the Sequoia Fund run by New York-basedvalue manager Ruane, Cunniff & Goldfarb .
The addition was disclosed inthe manager's investment letter of January 28 which shows the strategy ownsjust 23 stocks that meet its "open-minded approach to value". Thatmeans an emphasis on quality and growth and has led Sequoia to invest in stockssuch as Alphabet, Berkshire Hathaway and Liberty Media.
Sequoia was attracted toA2 because it has "an unusually long story behind it". The fundmanager acknowledges the theory that some populations of cows thousands ofyears ago developed a genetic mutation which affected the protein passedthrough their milk.
"While this is far fromsettled science, some researchers and nutritionists believe that because peoplehave only been drinking A1-bearing milk for a relatively short period byevolutionary standards, our bodies have a harder time digesting it than 'pure'A2 milk," the manager wrote.
But for the purposes ofmounting an investment case, Sequoia thinks A2 can be as effective brandingmilk as Chobani has been marketing Greek-style yoghurt.
“A good analogy here is Greekyoghurt, which is believed in some quarters to confer health benefits you can'tget from regular yoghurt," the letter explains. A2-protein milk is acommoditised product, like yoghurt
"A2 Milk is attempting todo the same thing, to great effect thus far. Riding powerful consumer trendsfavouring products perceived to be healthy and natural, A2 has become theleading premium milk brand in Australia while making rapid inroads into themassive and quality-obsessed infant formula market in China.
"An effort to penetratethe USmilk market is also showing early promise."
This won't be news to NewZealand and Australian investors whoare familiar with the A2 story since it was floated in 2015 on the ASX, andin 2012 on the NZX main board. Since then the stock has ridden the Chineseconsumption boom because of demand for its infant formula. A2 shares closed at$11.62 on the ASX on Tuesday.
"Notwithstanding itsremarkable success to date, A2 remains a young company, and much will depend onwhethermanagement can navigate a thorny distribution landscape in China, solidifythe positioning of an embryonic brand and exploit growth opportunities in newgeographies and product lines," Sequoia argued.
"With good execution,particularly in China, we think A2 could become a much larger business than itis today, more than justifying the statistically high price-earnings ratio wepaid for our shares."
The other stocks it added wereElectronic Arts and Melrose.
A co-founder of Ruane Cunniff ,the late Bill Ruane, was a long-time friend of Warren Buffett. The strategystumbled on account of a massive stake in Valeant Pharmaceuticals which ended acelebrated winning streak for the investment manager. Valeantnearly collapsed in 2016, under the weight of an accounting scandal, andhas since reinvented itself as Bausch Health.
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