Conditional Buy Opportunity in CALM on Price Dips

13 days ago

"The best time to buy commodity cyclicals is when it looks ugly, not when it looks great with a 10% dividend yield. So if we go to a gross profit of 10% net income of zero, which was the case with lower prices, we see that the company doesn't make money. And then when people and investors capitulate when there are no dividends and you bought it for the dividend when the price is not going up and you bought it because you hoped for more avian flu or something that's the time to look at it and then wait for these unknowns that's where the upside is because if egg prices for whatever reason I cannot predict avian flu or things like that stay low it means the dividend will be cut the dividend yield will go from 10 to 1% because there is simply no profit and then it will get revalued and it might get from 80 to 40 if there is no outlook for higher cash flows and that might make it interesting. Now you're risking upside 120 if egg prices go higher again on avian flu versus downside 40 if there is over supply."

The speaker identifies CALM as an attractive long-term opportunity which becomes compelling when the stock's earnings and dividends are hit by lower egg prices. He argues that buying when the company appears to be struggling, with earnings near zero and a dividend cut imminent, offers significant upside if egg prices recover, albeit with controlled downside. The view is presented as a conditional buy, waiting for a substantial price dip – potentially once in a decade – before capitalizing on the cyclic recovery.

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