Wednesday, May 18, 2016

Why I am not giving up on Agrofresh

Agrofresh is a spinoff from Dow Chemical that makes chemicals that can be applied to fruit in the field, mostly apples, to allow them to stay fresher longer. This reduces spoilage and waste while increasing yield for the farmer and prolonging freshness for grocers.

When the company was spun off from Dow it made certain projections in its pro forma documents. Unfortunately, because of a weak apple crop in North America last year, they did not hit their numbers and the stock was punished.

The company recently had an earnings call and because of the certain issues, related to the apple harvest, in the southern hemisphere it will have to push some sales into the 2nd quarter. The company just cant seem to get a break on matching forecasts to results.

Nevertheless, the product is in demand and the company has not cut its total year forecast. Additionally, members of management who know the company best have been buying shares. If the apple crop just recovers to its average than Agrofresh will come out looking good. I go back to what Warren Buffet said about the farm he bought. Some years we have a good harvest and some years not so good but overall it has been a good investment. I think the same will happen here. Eventually we will have a return to normal yields or a bumper crop and that means more applications of Agrofresh's products.

In the meantime this is one ugly chart:




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