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Should you buy last week’s worst performers?

Although the local share market raced ahead to a decade-high last week, not all shares joined in on the fun.

A few unlucky shares missed out on the gains and posted sizeable declines instead. Three that caught my eye are listed below, is this a buying opportunity?

The Bellamy’s Australia Ltd (ASX: BAL) share price fell a sizeable 20% last week after a mixed broker note out of Goldman Sachs. Although the broker retained its buy rating on the organic infant formula company’s shares, it slashed its price target by 18% due to concerns that its CFDA accreditation could be delayed by a few months. Without the CFDA accreditation Bellamy’s will be unable to sell its Chinese label products in the lucrative China market. Failure to receive accreditation soon could mean Bellamy’s underperforms the market’s expectations in FY 2019. While this would be disappointing, I do think that the selloff has been overdone and has left its shares trading at attractive levels now.

The Elders Ltd (ASX: ELD) share price tumbled 16.5% over the last five trading sessions. The majority of this decline came on Friday when the agribusiness company released a seasonal update. That update revealed that Elders’ has faced an exceptionally dry season in many parts of Australia. This has reduced demand for chemical input, reflecting negatively on retail earnings. Furthermore, the company has experienced a decline in cattle prices. As a result, underlying EBIT is expected in the range of $70 million to $74 million, compared to $71 million in FY 2017. With management remaining confident in achieving its long-term earnings growth target of 5% to 10% through to FY 2020, I think it could be worth a closer look after this decline.

The Sigma Healthcare Ltd (ASX: SIG) share price plunged almost 10% last week after the inevitable loss of the Chemist Warehouse supply contract was finally confirmed. EBOS Group Ltd (ASX: EBO) won the tender worth an estimated $1 billion in sales per year, leaving Sigma Healthcare with a major gap in its future earnings. This latest decline may have extended the pharmacy chain operator and distributor’s 12-month decline to a massive 50%, but I wouldn’t be a buyer of its shares just yet. I’m not convinced that the worst is over for the company.

Instead of Sigma I would be buying one of these top growth shares which have been kicking goals this year.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Elders Limited. 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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