Trade of the Day: WhiteWave Foods (WWAV)

Advertisement

Stocks ripped higher on Monday, and bonds weakened, after a big new industrial buyout announcement from Warren Buffett and comments from Federal Reserve officials that were interpreted to suggest that a rate hike is not necessarily in the cards for September.

All sectors were higher, led by energy, materials and industrials — though, to be fair, most stocks gapped higher at the open and did not move much from there. That’s a development typically associated with a quick round of short-covering rather than enthusiastic bargain-hunting.

Buffett made the biggest splash of the day by revealing he would up his 3% stake in aircraft parts maker Precision Castparts Corp. (PCP) to 100%. It will be his firm’s biggest purchase, and the deal had a notable impact on the rest of the aerospace industry.

Elsewhere in the world, some bad economic data fueled speculation for more stimulus in China. The prospect of government intervention there always gets people going, for some reason. Exports were reported below expectations, while imports were essentially in line. Exports to the eurozone, United States, Japan and emerging markets were all down in July. That doesn’t leave many areas that could be up. Weaker commodity prices lead the producer price index to fall more than expected, and it’s now at its lowest level since October 2009…which smacks of dreaded deflation.

As for Fed comments, expectations have begun to shift toward the notion that if there is an interest rate hike this year, it will be the only one. A Reuters survey conducted Friday (after the in-line July jobs report) showed that 13 of 19 primary credit dealers expect the Fed to tighten in September, but only nine think the Fed will raise rates twice in 2015. That’s down from 15 of 20 in the last survey.

Several Fed officials hit the yammering circuit, but none really seemed to move the dial on rate lift-off expectations. Fed Vice Chairman Stanley Fischer (who is the capo di tutti capi on the Fed board, outside Chair Janet Yellen) said that low inflation will not continue with the economy near full employment. He believes that “a large part of current inflation is temporary” and cited the decline of oil prices as well as other raw materials.

Atlanta Fed President Dennis Lockhart, meanwhile, said that the time to begin raising rates “is close.” Recall last week he stated that the economy appeared ready for the first hike to come in September.

Hey, remember Greece? The outline of its bailout agreement is taking shape, and it will then need to be approved by Greek parliament and eurozone finance ministers later this week. Currently, it appears that the deal should be done before Aug. 20, when Athens is due to make a 3.2 billion payment to the European Central Bank.

For today’s trade, I’m recommending a consumer staples play: WhiteWave Foods Co (WWAV), a New Age food company with a unique mindset that puts nutrition and environmentalism on the same plane.

Organic Foods Trade of the Day: WhiteWave (WWAV)

The company has profitably capitalized on this growing niche, with a share price that has risen more than 200% in the past five years. Shares have recently broken out to new highs at $52, and the chart points to a continuation of this advance. Some of the company’s better-known brands include International Delight, Land O’Lakes Half & Half, Silk and Horizon Organic milk.

In June, WhiteWave acquired Vega Foods, another emerging player in the plant-based nutrition market, for $550 million. A mix of internal growth and acquisitions like Vega should drive earnings growth for the next several quarters. This will add organic momentum, so to speak.

Shares were up 1.2% on Monday to close at $50.10. Buy WWAV at $51 limit, good till canceled. Set up to sell half at the initial target of $54.25 and hold the rest for further profits. Set a stop at $48.25 limit, good after 10:30 a.m. ET.

Jon Markman writes a daily trading newsletter, Trader’s Advantage, and CounterPoint Options, a service geared towards helping individual traders make steady, consistent profits with the VIX. Follow him on Twitter for his latest take on markets and innovation, and be sure to check out his Top Stock for 2015 here.


Article printed from InvestorPlace Media, https://investorplace.com/2015/08/organic-foods-trade-of-the-day-whitewave-foods-wwav/.

©2024 InvestorPlace Media, LLC