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A2 Milk Company Ltd shares fall 6%: Time to buy?

With investors in panic mode following heavy losses in the United States overnight, a number of the most popular shares on the local share market have fallen sharply today.

One of the worst performers in early trade has been the A2 Milk Company Ltd (ASX: A2M) share price. At the time of writing the fast-growing dairy company’s shares are down over 6% to $7.75.

Should you buy the dip?

Whilst it might be wise to hold off an investment until there are signs that the U.S. market has stabilised, I do think that a2 Milk Company’s decline has left its shares trading at an attractive level.

Although its shares are still trading at a significant premium to the market-average, I believe the company is capable of growing its earnings at a rate that more than justifies this premium.

This is due to the growing demand that the company is experiencing from the lucrative China market and the favourable new regulations that came into place in the market on January 1. I expect that these regulations are likely to have reduced competition for a2 Milk Company.

At present the company’s value share of the Chinese infant formula market is just 4.1% according to Kantar research. But considering the aforementioned factors and the shifting consumer trend towards premium infant formula products, I think there is a strong chance that the company will grow its share meaningfully over the coming years.

In light of this, I think a2 Milk Company would be a great buy and hold investment after these declines alongside industry peers Bellamy’s Australia Ltd (ASX: BAL) and Blackmores Limited (ASX: BKL).

It will, however, potentially be very volatile in the short-term for higher risk shares like these. Which could make them unsuitable investments for investors with a low tolerance for risk.

Here are three more top shares which I think investors ought to consider this year as well. I'm tipping them to beat the market.

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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 and has recommended Blackmores Limited. 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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