For example the company has lowered debt almost 50%. The company has a couple of initiatives including a biomass plant to burn almond tree trimmings and hull for power. These initiatives will continue to lower costs.
Select Harvests has also initiated plans to secure long term water supplies for their water intensive almond orchards.
I can give several reason why the stock is down. One is that almond prices have decreased around the world. Although this is important short term I do not see it as a long term issue as almond prices like all farm products have volatility in pricing from year to year. The other reason is the decline in the Australian dollar vis-a-vis the US dollar.
|Lower Aussie dollar makes Australian assets cheap|
The fundamental business is what I keep my eye on. If I can exchange my currently overvalued US dollars for currently undervalued Australian dollars and then buy a profitable growing business then I will do it everyday.
Most people will not do it because they have a short term mindset and sell out. As I pointed out in my article about stocks being fractional ownership of businesses we must analyze the company on its merits as a continuing enterprise and whether it is still meeting the criteria of why we purchased shares of the company in the first place.
To review the reasoning behind owning Select Harvests is summarized below:
- Almonds are an important non-animal protein source
- Almonds are a water intensive crop
- California is the top producer of almonds (80% of world crop)
- California is running out of water
- California politicians are putting pressure on agribusiness to reduce water intensive crops like almonds
- Demand for almonds will only grow over time
- Australia is uniquely positioned to capture increased Asian demand for almonds over the coming years