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Infant formula boom sends Wattle Health Australia Ltd shares rocketing higher

The Wattle Health Australia Ltd (ASX: WHA) share price continued its meteoric rise on Thursday by climbing a further 25% to an all-time high of $1.30.

This means that the fledgling food and infant formula company’s shares have now risen a staggering 242% in just the last six months.

Why did its shares rocket higher today?

Whilst there was no news out of the company to send its shares higher today, investors appear to have been fighting to get hold of its shares due to the infant formula boom.

Much like a2 Milk Company Ltd (Australia) (ASX: A2M), Bubs Australia Ltd (ASX: BUB), and Bellamy’s Australia Ltd (ASX: BAL), Wattle Health has its eyes firmly on the lucrative Chinese infant formula market.

But unlike Bubs and Bellamy’s, the company looks likely to receive its CFDA approval in the near future, which will allow it to sell its infant formula products in China in January when new laws come into place.

At present a2 Milk is the only local company that has been granted CFDA approval by Chinese regulators.

Wattle Health should soon follow suit thanks to its stake in Victoria-based CNCA accredited infant formula blender, packer, and distributor Blend and Pack. Its application is with regulators and a decision is expected in November.

Should you invest?

Whilst Wattle Health could certainly have a bright future ahead of it if it can carve out a share of this lucrative market, I’ll be sitting on the sidelines until I’ve seen sales data that shows this to be the case.

I would recommend fellow investors do the same. After all, the infant formula shares are starting to enter bubble territory in my opinion. While some may well succeed, not all of them are guaranteed to do so.

So when the bubble bursts, hard-earned money could be lost with it.

In the meantime, investors might want to consider these hot growth stocks which trade on reasonable valuations.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. 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.

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