Yesterday MM switched from our Costa Group (CGC) position to the battered a2 Milk (A2M) a move we have been flagging over the last few weeks. We are looking for some performance reversion to the last 6-months during which time CGC has rallied over 30% while A2M has fallen by 50%, obviously things can always become more stretched but this is the area where we believe the risk / reward and respective valuations favour A2M. Buying ahead of A2’s result on the 25th February is a risk given the underlying trends in the business, however with more than 40m shares short sold on the stocks, a twinkle of positivity and the stock could bounce hard.
MM is bullish A2M from the $10 area
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