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Meat Stocks React To Mad Cow
Written by Rebecca LipmanOn Tuesday the USDA confirmed rumors that Mad Cow disease has been found in California, and stock markets were quick to react.
Mad Cow disease, or bovine spongiform encephalopathy, comes up fairly often. This will be the fourth California case since 2003, and there were 29 reported incidents across the U.S. in 2011 - but it's always a big to-do.
According to officials, the diagnosed dairy cow did not enter the food chain and has been destroyed by state authorities. And the disease is not transferable through milk - so for all intents and purposes, things should be okay.
Markets felt otherwise - Pilgrim's Pride Corp (NYSE:PPC), the world's second largest poultry company, saw stock prices climb 7.22% on the possibility consumers will, at least temporarily, switch up their meat consumption.
Tyson Foods (NYSE:TSN) rose 1.53%. Cattle futures dropped the most in 11 months in Chicago (via Bloomberg), and "the world's largest beef producer, Brazil's JBS SA (JBSS3), fell by as much as 5.2% before closing 0.3% lower in Sao Paulo."
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Business Section: Investing Ideas
Market reactions to news events tends to be overblown, and recovery eventually occurs. After all - do you still eat spinach after the big scare some years ago, or pork after the swine flu incident, or meat at all after Oprah announced she was going vegan for a week? Let's not even start with pink slime.
Price data is from Apr. 24, 2012. (Click here to access free, interactive tools to analyze these ideas.)
1. BRF - Brasil Foods S.A. (NYSE:BRFS): Produces and sells poultry, pork, beef cuts, milk, dairy products and processed food products in Brazil and internationally. Market cap of $16.58B. Tuesday's closing price: $19 after a market change of 2.76%. The stock has lost 4.9% over the last year.
2. Hormel Foods Corp. (NYSE:HRL): Produces and markets various meat and food products in the United States and Internationally. Market cap of $7.49B. Tuesday's closing price: $28.38 after a market change of 0.6%. Relatively low correlation to the market (beta = 0.46), which may be appealing to risk averse investors. The stock has gained 2.12% over the last year.
3. Industrias Bachoco S.A.B. de C.V. (NYSE:IBA): Operates as a poultry producer in Mexico. Market cap of $1.0B. Tuesday's closing price: $20.05 after a market change of 0.25%. The stock has lost 28.55% over the last year.
4. Pilgrim's Corp. (NYSE:PPC): Produces, processes, markets and distributes fresh and frozen chicken products to retailers, distributors and foodservice operators primarily in the United States. Market cap of $528.05M. Tuesday's closing price: $7.13 after a market change of 7.22%. The stock is a short squeeze candidate, with a short float at 9.65% (equivalent to 5.23 days of average volume). The stock has had a couple of great days, gaining 5.16% over the last week.
5. Smithfield Foods Inc. (NYSE:SFD): Engages in the production and marketing of fresh meat and packaged meat products in the United States and internationally. Market cap of $3.33B. Tuesday's closing price: $20.66 after a market change of 1.87%. The stock is a short squeeze candidate, with a short float at 9.31% (equivalent to 7.1 days of average volume). The stock has lost 11.44% over the last year.
6. Tyson Foods Inc. (NYSE:TSN): Engages in the production, distribution and marketing of chicken, beef, pork and prepared food products, as well as related allied products worldwide. Market cap of $6.62B. Tuesday's closing price: $17.93 after a market change of 1.53%. The stock has lost 6.03% over the last year.
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Kapitall's Rebecca Lipman does not own any of the shares mentioned above. Data sourced from Finviz.
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