CanadianTMF (< 20)

STKL

August 22, 2010 – Comments (1) | RELATED TICKERS: STKL

SUNOPTA-Organic Food Play

I have been observing this stock for almost 6 months now. Firstly I came across this stock through a news story about bio-fuel system ordered by chinese company amounting to more than $5MM.

Not a significant order to read and research this stock. However, as I saw price-momentum for a while now, it was intriguing to verify the facts. Couple of catalysts played role in this momentum are as follows:

1. Settlement of class action

2. Positive outcome expected for SEC investigation

3. Positive earnings and beating market expectation

4. Food sector

5. Sell off distribution division to settle the up coming debt maturity

 Challenges going forward

1. Demonstration of growth story to investors

2. Creating entry barrier as a lable food manufacturer

3. Controlling cost and improvement of margin

4. Hedging against basic cyclicality of agri output

Positives about company

1. Growth sector (Organic Food), however challenged currently due to economic uncertainity

2. Food Sector- Inherent strength in terms of ovrecoming economic cycles

3. Management is cautious about not repeating the same mistake of restatement of financial statement. However, it is to be seen how prudent is current inventory reporting system.

Speculation Risk- Moderate at this stage

Technical Indicator- Stock may loose its momentum for the next 3 months

Trading Strategy- Buying call and put for same strike price for March 2011.