Should you buy shares of Bellamy's Australia Ltd?

The Bellamy's Australia Ltd (ASX:BAL) share price has fallen another 2% today

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of Bellamy's Australia Ltd (ASX: BAL) have continued their bumpy start to the new year, falling another 2% early in today's session. That compares to a 0.3% gain for rival A2 MILK FPO NZ (ASX: A2M) ("A2 Milk") and a 0.6% decline for the benchmark S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).

What's happening to Bellamy's shares?

Bellamy's was one of Australia's top-performing shares in 2015. After debuting on the ASX at just $1 per share back in August 2014, the shares hit an all-time high at $16.50 just one week ago. In the time since however, they've retreated nearly 20% to just $13.52.

It should be noted that the fall is unlikely to have anything to do with the underlying business itself. Indeed, demand for baby formula – dubbed "white gold" – has been in red-hot demand around the globe with supermarkets and pharmacies struggling to keep their stocks shelved.

Demand could continue to soar internationally, especially after China recently scrapped its controversial 'one child policy'.

Instead, the fall can most likely be attributed to the massive run-up in share price experienced by the group over the last 16 months, as highlighted above. Although there is certainly potential for the company to get even larger than it is today, investors are likely becoming unnerved about the heights at which the shares are currently trading – they need to see results that can justify their valuation.

Still, Bellamy's is expected to post a bumper first-half earnings result when it reports in February while the A2 Milk and Blackmores Limited (ASX: BKL) businesses should also continue to perform strongly.

Should you buy?

I still own shares of Bellamy's, although I did sell some recently. Personally, I think that seems like a fair assessment in itself. I believe Bellamy's still has a very promising future — so much so that I'm holding onto a decent amount of shares — but investors should be cautious of buying at the current price. That said, investors could also look to add Bellamy's to their portfolio should the shares fall much further in price.

Motley Fool contributor Ryan Newman owns shares of Bellamy's Australia. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. You can follow Ryan on Twitter @ASXvalueinvest. The Motley Fool Australia owns shares of Bellamy's Australia. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »