The Bellamy’s Australia Ltd (ASX: BAL) share price was taking a bath today as ASX rival a2 Milk Company Ltd (ASX: A2M) was trading 1% higher.
What Bellamy’s Does
Bellamy’s is an infant formula and organic food company founded in Tasmania founded in 2004. It was the first company to offer an organic infant milk formula range to Australian mothers. It is now becoming a growing presence in the large Chinese market.
Shares Are… Down?
Today, Bellamy’s shares were leading the ASX sharply lower, down nearly 6%, on no ‘official’ news. Shares of rival a2 Milk rose more than 1%.
Bellamy’s has not released any news, leading some commentators to speculate that analyst downgrades are responsible for the sell-off. According to The Wall Street Journal, six of the seven analysts following Bellamy’s shares have a ‘hold’ rating (one has a sell).
While no news is sometimes good news, Bellamy’s shares are known to be extremely volatile. What’s more, Bellamy’s shares have traded from around $7.20 in January to over $9 today — a decent gain by anyone’s measure.
As we wrote a few months ago, Bellamy’s shareholders are anxiously awaiting news from Chinese authorities which will enable it to sell directly into China. To this end, Bellamy’s is believed to have engaged influencers to try and win the appeal of consumers and regulators alike.
However, this regulatory uncertainty, coupled with the share price volatility, has led some investors to ‘short sell’ the company’s shares. Meaning, some investors are anticipating a sell-off in Bellamy’s shares (click here to learn what short selling means).
What Now?
No-one could say for sure what will happen next but Bellamy’s shareholders should be accustomed to this uncertainty by now.
Given I have no ‘edge’ in knowing how this might play out, I’m steering clear of Bellamy’s shares, for now. At least until we know whether its Chinese regulatory efforts will bear fruit.
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At the time of publishing, Owen does not have a financial interest in any of the companies mentioned.
