Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Continue Treading Carefully With Amira Nature Foods Stock

By Modest MoneyStock MarketsMay 05, 2016 01:42AM ET
www.investing.com/analysis/continue-treading-carefully-with-amira-nature-foods-(anfi)-stock-200128063
Continue Treading Carefully With Amira Nature Foods Stock
By Modest Money   |  May 05, 2016 01:42AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Amira Nature Fds (NYSE:ANFI)

Back on February 25, 2016, this humble writer had written a piece highlighting the potential investment pros and cons of Amira Nature Foods. In that article, I took an overview of the company and came to the conclusion that while it looked like a relative bargain based on its trailing twelve months earnings, before committing capital to this investment, one should conduct their own thorough due diligence before making any investment as some red flags existed that needed to be answered before making a commitment to ownership of this company.

When that article got released back in February, it got thrashed by what I would dub the “fan boys” of Amira Nature Foods stock on various stock message boards and forums. That in it of itself should raise eyebrows of any prospective investor looking to commit their hard earned capital to this particular stock: when people lash out at you for asking legitimate questions about a business, that should make you wonder how much rationality is surrounding the stock of that business.

On February 25, 2016, Amira’s stock traded at $12.50. Fast forward a little over 2 months and the stock trades today at just under $7.00. If you had decided to commit your hard earned money to Amira’s stock back when this article was released, you would be staring at a 44% decline in your investment.

This is not to gloat about being right or wrong. I didn’t provide any predictions and projections of where I thought the stock was going back in February and I won’t be predicting anything today. What I did advise was that a potential investor should tread carefully as there were – and still are – a plethora of issues surrounding the business that is Amira Nature Foods that need to be answered to one’s satisfaction in a thorough and rigorous fashion.

It is easy to get caught up in the excitement and potential of a seemingly promising sounding growth stock opportunity at low valuations. It gets even more dangerous when you actively start seeking out confirmation bias online in various stock forums and messaging boards on a particular stock you find so exciting.

A true investor conducts thorough due diligence on the company they are looking to invest in. You absolutely need to know accounting and possess financial and mathematical literacy. If there are accounting red flags that pop up, you need to be able to understand if they are serious or not. You need to be able to gauge whether management has integrity and an eye towards shareholders. The right company should be able to withstand the skeptical scrutiny that you put it through.

With all of that said, the primary reason Amira’s stock has fallen so badly has to do with the fall in the commodity price of basmati rice. Along with a decrease in international revenue, revenue has fallen by 17.3%. One of the factors a potential investor has to be aware of when analyzing a commodity-based company is the concept of peak earnings and value traps. While Amira’s seemingly low P/E ratio of 4.8 might seem enticing on a shallow glance, you need to be able to adjust this based on where in the commodity cycle the company is and relative to a full commodity cycle of average earnings.

What this humble author is attempting to get across to the reader is this: when you are looking to commit your hard earned cash into a potential business, you better understand that business inside and out or you will get burned badly. A business like Amira Nature Foods requires a deep knowledge of the basmati rice market, a working knowledge of accounting, and an ability to gauge the extent of shareholder friendliness of management. There are many questions you need to ask, and answer, before committing your capital.

Investor, know thyself.

Disclosure: This author has no positions in any stocks mentioned and does not plan to open any positions in any stocks mentioned for at least 72 hours after publication of this article.

Original post

Continue Treading Carefully With Amira Nature Foods Stock
 

Related Articles

Continue Treading Carefully With Amira Nature Foods Stock

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email