Have the juicy returns in poultry stocks already been made?
Is now the time to start looking elsewhere?
Poultry stocks are once again starting to make flapping good returns. Not so long ago the small flock of chicken companies on the JSE were grounded by the profound effects a prolonged drought had on feed prices, as well as an increased level of cheap imports and weak consumer demand. The scoreboard now shows the JSE’s big bird, Astral Foods, is up more than 50% for the year to date, while Sovereign — underpinned by a private equity buyout — is up 43% and RCL Foods, which owns chicken producer Rainbow, has moved up 24%. Even Quantum Foods, a commodity poultry producer (with eggs and feed mixed in), is up 12%.The big question now is whether the easy money has been made on poultry stocks, and if it’s time to look elsewhere for more sumptuous returns. Recent poultry sector trading has been characterised by a fattening up of margins thanks to markedly lower feed costs (due to a much improved maize crop) and firmer selling prices (especially during the winter months). The outbreak of avia...
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