CGC
The momentum from Costa Group (CGC) remains terrible.
Eyeball economics, at the local grocer suggest prices for much of what they sell are pressured, and there is plenty of talk about favourable weather bolstering supply in general.
This doesn’t bode well for a cyclical stock on c22x forward. The company is well managed enough, but the balance sheet is not water tight, and although the stock has halved from peak, those peaks involved paying c5x book for a fruit growing company.
As such, you’ve not (in our view) actually seen what capitulation looks like, yet.
We’ve mumbled out loud before that we like the thematic that a stock like Costa provides, and a world in which supply chains are perhaps a fraction less reliable than the used to be, a fraction less global and offshore and just-in-time centric, is one in which owning a semi-vertically integrated upstream producer for an important commodity is potentially attractive.
However, mindful of the momentum signal, and the above weather effects (which are self-evidently outside the companies control) we will continue to sit on the side-lines.
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