CALM before the storm
Usually I’m quick to dismiss stocks that have gone up by a figure of 4 in just the last year, but this one looks special.
Cal-Maine Foods produces namely eggs and egg products, from shell eggs to low carb and organic varieties. The company is posting record profits as the price for commodities and food related products, even eggs, soars to new highs.
One thing in particular that I like about this company is the amount of short interest currently held on the stock. At this time, NASDAQ.com shows that the company has about 50% of its shares held short. This is on a company that is very financially sound, a PE of 8 and a profit margin that has tripled in the past year alone. Fundamentally, this is an awesome stock, technically not so much.
Today’s drop of 11% is a bit frightening but for the long term, this looks like an awesome investment. If Cal-Maine can continue these record results it should push for record highs. The short squeeze of about 12 days worth of volume makes it an even better play. If this company posts better results, as it should with the higher food prices, I see a whole lot of short covering coming into play.
Right now its a hold, no position until we see a minor correction. Its sitting on a short term support line but I’m wary that the stock will continue to fall before it moves up. With a company this profitable, it is doubtful that institutions will want to remain short for very long. Looks great. A sub $1 Billion market cap and exposure to an inflated currency make me want to pull the trigger.
