The Motley Fool

Is $1,000 of A2 Milk shares a good investment?

A2 Milk Company Ltd (ASX: A2M) shares have been one of the top ASX 200 performers in 2020. In fact, the Kiwi dairy group’s shares have climbed 27.88% since the start of the year. That in itself sounds pretty impressive, but then you remember how many of A2 Milk’s ASX 200 peers have performed so far this year.

The S&P/ASX 200 Index (ASX: XJO) is down 20.43% since 2 January amid the COVID-19 pandemic and an oil price war between Saudi Arabia and Russia. This makes A2 Milk’s share price growth even more remarkable in the face of a broader market downturn.

So, is there still time to buy into the Kiwi dairy group for a good price today?

Should you invest $1,000 in A2 Milk shares?

It’s easy to see why the group’s shares are rocketing higher. We saw ASX supermarket shares surge as panic buying increased in February and March. However, many supermarket suppliers also benefitted from this increased demand at the checkout.

That drove A2 Milk shares to a new 52-week high of $19.23 per share on 16 April. To some, this could signal that its shares are overvalued right now.

It’s hard to go past the dairy company’s recent success if you’re looking to invest. Of course, past performance is not a reliable indicator of future performance. But at the same time, with A2 Milk’s increasing share price pushing its overall value to $13.3 billion, there’s a lot to like about this company.

Compare that to 5 years ago, when A2 Milk shares were trading at just $0.48 per share. Now, if you didn’t invest in the dairy group in 2015, there’s no point crying over spilled milk! In fact, all of us wish we’d bought A2 Milk in the last 5 years.

Foolish takeaway

I don’t think the current $18.00 per share valuation should put you off buying A2 Milk. Sure, there are challenges facing the dairy industry in Australia and New Zealand. However, A2 Milk has also had success in Asia and is deepening its overseas network, which should see it well placed for continued growth in the years ahead. I still think A2 Milk shares could easily be a top 10 ASX share within the next decade.

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Motley Fool contributor Ken Hall 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.