Inghams share price slammed after TPG Capital sells down its holding

The Inghams Group Ltd (ASX:ING) share price has been the worst performer on the ASX 200 on Thursday. Here's why…

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The worst performer on the S&P/ASX 200 index on Thursday afternoon is the Inghams Group Ltd (ASX: ING) share price.

At the time of writing the leading poultry producer's shares have crashed a sizeable 8% lower to $4.07.

This decline means its shares have now tumbled 16% since peaking at an all-time high of $4.87 two months ago.

Why is the Inghams share price crashing lower today?

Investors have been heading to the exits in their droves after the AFR reported that TPG Capital was selling down its sizeable stake in the company.

According to the report, UBS has been in the market looking for buyers for 50 million shares owned by the private equity giant.

The broker was seeking $4.28 per share for TPG Capital, valuing the shares at approximately $214 million. After the sell down the private equity firm will retain a 19% stake in the company.

Interestingly, last month UBS' equity analysts slapped a sell rating and $3.40 price target on Inghams' shares.

Should you buy the dip?

Whilst I think that Inghams' shares are reasonable value at the current level, I do have concerns about the impact that a potential increase in input costs will have on its margins in the second half of FY 2019.

This also appears to have caught the eye of short sellers. On Monday Inghams became the most shorted share on the Australian share market with 17.5% of its shares held short. I fear this could weigh heavily on them in the near term.

Overall, I don't believe the current share price offers a compelling enough risk/reward and would suggest investors wait for a better entry points.

In the meantime, I would rather be a buyer of companies selling its products such as Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW).

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COLESGROUP DEF SET. 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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