One mildly positive thing about a bear market is that it allows you to consider a wider range of stocks for your watch list. During a bull market, with buying decisions to make, there’s not much time to browse through the odd stories on the edge of things. When buying isn’t a possibility, you can broaden your horizons.
My stock idea for today is American Dairy (ADY), which, despite its name, is actually a Chinese company that produces milk powder, soybean milk powder and walnut products (?!) in northeast China.
While many Chinese milk companies were hit by a scandal involving the addition of melamine to milk to raise its (apparent) protein level, American Dairy’s reputation is intact. The company has two dairy farms with a capacity of 10,000 cows each that meet international standards for organic farms.
The purity of American’s products has created a big demand outside its usual Northeast China sales area, pulling the company into the Beijing market.
The stock was pulled down by the melamine scandal, but has rebounded strongly, soaring from 6 to 17 in just a few months.
One big problem with the stock is that the company hasn’t reported earnings since Q3 2007. This has been the subject of several filings with the SEC, and presumably the results will come out eventually. Under these circumstances, the fact that a new analyst has picked up coverage on the company is reassuring news.
I wouldn’t recommend buying ADY at this point, but its performance under adverse circumstances shows some real underlying strength. If the emerging markets can get organized to give us a buy signal and the company can get its reporting in order, American Dairy will be a strong growth story.