A2 Milk Company Ltd (ASX:A2M) and Bellamy’s Australia Ltd (ASX:BAL) shares are sinking lower

Investors appear to be in risk off mode ahead of the FOMC meeting overnight in the United States which is expected to result in another 25 basis points rise in interest rates.

This has led to the market sinking notably lower today. At the time of writing the benchmark S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) is down almost 0.7%.

But one group of shares which have fallen more than most today are infant formula shares.

Here is the state of play in the industry at lunch:

The A2 Milk Company Ltd (ASX: A2M) share price is down over 3% to $10.53.

The Bellamy’s Australia Ltd (ASX: BAL) share price has fallen 5.5% to $16.58.

The Bubs Australia Ltd (ASX: BUB) share price is down almost 4.5% to 89 cents.

The Jatenergy Ltd (ASX: JAT) share price is off 4.5% to 11 cents.

The Wattle Health Australia Ltd (ASX: WHA) share price is in a trading halt while it conducts a bookbuild for the shortfall under its entitlement offer.

Why are infant formula shares tumbling lower?

With no negative news out of these companies or broker notes that I’m aware of, I suspect that these declines are due to some investors taking profit off the table ahead of tonight’s FOMC meeting.

After all, many of these shares have been strong performers this month. Prior to today the a2 Milk Company share price was up 10% in a week, the Bellamy’s share price had risen 10.5% in the space of two weeks, and Bubs was up a sizeable 21% since the start of the month.

Should you buy the dip?

I think that these declines have presented investors with an opportunity to pick up shares in a2 Milk Company and Bellamy’s at a better price. Though, I would only purchase shares if you were prepared to hold on for the long-term.

In the short-term I suspect that these infant formula companies could remain a touch volatile, but five years from now I feel very confident that demand from Asia will result in strong earnings growth that propels their shares significantly higher than where they stand today.

Lastly, here is another investment boom that could be many, many times bigger than the infant formula boom.

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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 Scott Phillips.

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