The Bega Cheese Ltd (ASX: BGA) share price hit a new 52-week high in morning trade before dipping slightly, but is it a strong ASX buy right now?
Why the Bega Cheese share price hit a new 52-week high
It's been a hectic start to the year for many ASX 200 shares. The S&P/ASX 200 Index (ASX: XJO) is down 16.67% this year but Bega Cheese has been one of the least volatile constituents. The Aussie food company's shares started the year at $4.32 per share and it's lowest closing price has been $3.92 per share. That was on January 6, meaning the coronavirus pandemic hadn't yet gripped markets.
The relative stability of Bega's share price can partly be attributed to the fact that it operates in the Consumer Staples sector and has non-cyclical earnings. The dairy producer has also benefitted from strong supermarket sales this year as Aussies flocked to stock up on essential supplies. This strong consumer demand has trickled down from ASX supermarkets to boost suppliers like Bega this year.
This has also been good news for shareholders with the Bega Cheese share price closing at a new 52-week high of $5.29 per share yesterday before opening higher again today and rallying to $5.50 before dropping back late morning. This is in stark contrast to last year when Bega's share price largely followed a downward trajectory resulting partly from a devastating bushfire season that hit the region around Bega particularly hard. While Australia grapples with the pandemic, many local businesses and individuals are still reeling from last summer.
But with the Bega Cheese share price rocketing 21.53% higher in 2020, is it still a strong ASX buy?
Is Bega a strong ASX buy today?
It's great news for shareholders and the Aussie economy when Bega is doing well. However, when it comes to investing in ASX shares, I'm focused on the long-term.
I think the recent boost for Bega may be a little short-lived. There's strong competition from the homebrand products in Coles Group Ltd (ASX: COL) supermarkets which are supplied by rival Murray Goulburn. On top of that, Australia's relationship with China appears frayed which could hit Aussie exports hard.
Bega exports over 60 million units of cheese per year to approximately 40 different countries. That means the Aussie dairy group is facing some medium-term headwinds and could see earnings under pressure in 2021.
Foolish takeaway
The Bega Cheese share price has been a strong outperformer in 2020. It's hard to bet against ASX shares with positive momentum, but no one knows what to expect right now. I wouldn't be speculating on Bega's short-term share price movements. Instead, I'd only buy if the long-term picture makes it a strong ASX buy for the future.
