Is this why Bellamy’s Australia Ltd shares surged higher today?

One of the best performers on the local market on Monday has been the Bellamy’s Australia Ltd (ASX: BAL) share price.

In afternoon trade the infant formula company’s shares are up over 5% to $10.89.

Why are its shares higher today?

With no news out of the company today, I suspect that its move higher could be related to infant formula-related news out of Europe.

Over the weekend French giant Lactalis recalled 12 million tins of infant formula from across the world following a salmonella contamination.

At present 36 children are known to have fallen sick in France as a result of the contaminated baby milk.

I believe there is a danger that this outbreak could tarnish the Lactalis brand in the lucrative China market, potentially putting the likes of Bellamy’s, A2 Milk Company Ltd (ASX: A2M), Wattle Health Australia Ltd (ASX: WHA), and Bubs Australia Ltd (ASX: BUB) in a position to win further market share.

Should you invest?

While I wouldn’t necessarily recommend investing purely on this news, I do think that Bellamy’s is an attractive option for investors right now given the potential of the South East Asian market.

However, it would be good to understand how its CFDA accreditation is progressing. Management advised at its annual general meeting that it expected to submit its application by the end of the calendar year, but has not notified the market as to whether it met its deadline.

Delays in achieving its CFDA accreditation could potentially result in a weaker-than-expected sales performance in FY 2019 and the underperformance of its share price over the 12 months. As a result, I feel it may be prudent for investors to wait until its next business update before investing.

In the meantime, I think these high-flying growth shares would be great options for investors.

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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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