MENU

Should you buy A2 Milk Company Ltd (ASX:A2M) and Bellamy’s Australia Ltd (ASX:BAL) shares?

On Monday the shares of A2 Milk Company Ltd (ASX: A2M) and Bellamy’s Australia Ltd (ASX: BAL) continued their poor run and started the week in the red.

These latest declines mean that a2 Milk Company’s shares have fallen almost 31% from their 52-week high and Bellamy’s shares have dropped a massive 52% from their high.

Is this a buying opportunity?

While I’m not overly convinced that the declines are necessarily over just yet, I do think that this is a buying opportunity for patient investors.

Especially with both their shares trading on some of the most reasonable earnings multiples they have traded at in some time.

I’m not alone in thinking they are in the buy zone either. A note out of Goldman Sachs this morning reveals that it remains bullish on both companies’ prospects.

According to the note, centred around the Chinese consumer staples market, Goldman expect the infant milk formula market to grow by a compound annual growth rate of 9% through to FY 2020.

Although the broker doesn’t necessarily believe the market will grow much by way of volume due to the current high level of penetration and a shrinking marriageable population, it expects the value of the market to grow through premiumisation, demand from lower tiered cities, and niche category expansion.

In light of this, the broker think both companies are positioned well for growth and has price targets of $12.20 on a2 Milk Company’s shares and $21.00 on Bellamy’s shares, implying significant upside for both of them.

What about other shares?

One company that Goldman isn’t overly bullish on is Blackmores Limited (ASX: BKL).

The broker’s research appears to show that Blackmores is lagging is nearest competitor Swisse in China. In light of this, it expects Blackmores to increase its marketing and promotional activities, weighing on its margins in the short term.

Goldman has remained neutral on Blackmores with a $143.50 price target on its shares.

Looking for the next a2 Milk Company and Bellamy's? One of the mid cap growth stars could be what you are looking for.

The Disruptors: 3 Revolutionary Aussie Companies to Back for 2018

We’re living in one of the most exciting times in investing history. Innovation and a booming culture of entrepreneurship are constantly creating new companies with the potential to make forward-thinking investors very rich. Now more than ever, one small, smart investment could make a huge difference to your wealth.

That’s why at The Motley Fool we’ve been scrutinizing the ASX to uncover the kinds of companies that we believe could turn into the next Atlassian.

We’ve found three exciting companies that we believe re poised to perform in the new year. Click here to uncover these ideas!

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 Scott Phillips.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…

Including:

The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!