The Bellamy’s Australia Ltd (ASX: BAL) share price has continued its impressive run on Wednesday.
At one stage the infant formula and baby food products company’s shares were up as much as 10% to $10.94 this morning. Its shares have since given back some of these gains, but still sit 9% higher at $10.88 at the time of writing.
This means the Bellamy’s share price has now risen a remarkable 34% since this time last week.
Why is the Bellamy’s share price on fire?
With no news out of the company today’s strong share price rise is a bit of a mystery, but there are a couple of potential catalysts for the buying.
One catalyst could be short sellers buying back shares to close their positions. According to data provided by ASIC, at the last count Bellamy’s had 11.6 million shares or 10.3% of its issued shares held short.
This compares to its 30-day average volume of 2.27 million according to Bloomberg. Which means that there are five times more shares held short than the daily average volume. Clearly when short sellers decide that enough is enough, there will be a lot of demand from the buy side.
Incidentally, at the time of writing the volume of shares traded stands at 2.7 million today, which is notably higher than its daily average.
Another potential catalyst could be speculation that the company may receive its SAMR accreditation soon. This accreditation is required to sell its Chinese-labelled products on the China mainland.
Given the company’s strong brand awareness in the country, many believe that SAMR accreditation will be a key driver of sales and profit growth over the coming years.
Should you invest?
I think that Bellamy’s could be a great long term investment option (if it receives its SAMR accreditation) along with rival A2 Milk Company Ltd (ASX: A2M). But it is worth remembering that it is a reasonably high risk option, so may be unsuitable for some 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 Scott Phillips.