TGR

Tassal is down some 10% today.

Yesterday, TGR presented at the Bell Potter agricultural forum. They provided a consistent trading update, i.e. nothing new or different from the Goldman’s emerging companies forum back in April, or the Feb result before that, that we noted.

External research is worth relatively little in our process, but still, in the effort to search around for news we do note that Goldman’s had released a fairly rosy note just earlier in the week, as did UBS, with both brokers updating earnings and price targets. At the other end, Barrenjoey initiated with a particularly negative outlook and a $3 price target.

Broker notes can shift narratives, and the bearish Morgan Stanley note on insurance companies, from last week, certainly seemed to drive sentiment towards the sector for a while; hence, at the margin, we do care what is being written or said.

TGR has observable product prices (salmon) that are elevated and didn’t trade weakly. The stock is a value stock, and to the extent that value as a style has outperformed quality or growth of late, we would be surprised if a down day on the market had such an impact on a stock that wasn’t expensive to begin with.

Earnings assumptions also do not appear unduly high (noting the high salmon prices) such that a failure to give an upgrade (or to be more explicit in guidance) in yesterday’s outlook statement should result in a thesis breach for someone, somewhere.

But, and this is perhaps the main point of the note, markets are generally efficient and outright mistakes are rare. An accidental “fat finger trade” is not an idea you want to rely on a-priori.

So, although we hold the stock in the core portfolio, we prefer to wait until we have more information, given the portfolio’s risk tolerance, before looking to add. However, we remain happy enough to hold until given reason to do otherwise.

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