It has to be said, the timing of the Punter's purchase of shares in the Australian Agricultural Company (ASX code AAC) at the start of the month, was not the best.
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Less than two weeks later, the company announced heavy losses of cattle on four of its stations due to the Queensland floods, which are not over yet.
Moreover, it pointed out that extremely hot and dry weather continues to push up feed and transport costs for the majority of the company's other cattle stations.
The financial impact on the financial results for the year ending next month will be "material". No wonder the shares dropped some 15 per cent, falling below $1 for the first time for at least five years.
The Punter gave serious consideration to topping up his holding, but decided against it.
The shares rebounded quickly and at the time of writing were down about 10 per cent. The dealing costs involved in adding to his holding make it not worthwhile, but he will keep an eye on them.
The drought and floods are not great for the cattle export company Wellard (WLD) either. It announced very heartening results on February 14, turning a $7.2m loss into a $2.9m net profit in the latest six months.
Strong cash flow meant it ended the period with $13.4m in the bank, after paying debts worth $16.4m.
The Punter sold WLD at a small profit in December. He still sees the company as a good recovery stock, and if the shares drop below 5c he is happy to buy back in.
Cattle losses in Queensland and restocking elsewhere if and when the drought breaks could push cattle prices up, making exports less profitable.
Wellard has become as much a specialist ship chartering company as a direct exporter. The more South America and other countries undercut Australian cattle prices, the more they need Wellard's vessels.
It's a nice cushion.
- The Punter has no financial qualifications and no links to the financial services industry. He owns shares in a number of companies featured in this column.
