BFC3540 Stock Debates – Week 3 – A2M & TWE

Woooooweee the final week of stock debates!!!

Just a quick reflection on what we touched on last week:

  • Bellamy’s received a takeover offer at a 50% premium which had a positive effect on A2
  • A2’s share price still struggling to fully recover from their FY19 report release
  • A2 still a great company which looks to move past short term headwinds in the long term
  • TWE correlated with the general market, has a good outlook but be wary of new developments

Now in terms of this week’s movements:

  • A2 had an increase of 0.2%
  • TWE is down 2.5%
  • ASX200 is also down 3.0%

There was no noteworthy news for these two companies this week– the movements seen are largely due to the global recession fears and general market factors.

Students may be asking – how has A2 remained flat this week despite the markets falling 3%? Well … A2 has fallen more than 30% in the past month, it appears as though the share price has found a potential bottom / area of consolidation. However, the share price still has headwinds and work to do moving forward.

a2

While the A2 share price being flat for the week is a good sign – we believe students could consider a small long position in A2 for a few reasons. Firstly, the share price might have bottomed and the general index is expected to show some signs of recovery next week. Secondly, a small position (i.e. 25%) is conservative enough to exposure you to enough of the upside, while minimizing the downside should things go south.

As for TWE, the share price has decreased in correlation to the ASX200 and general market conditions – as expected.

The board has also toyed with the idea of a possible divestment of a cheaper brand in its portfolio, with funds being reinvested into a more luxury wine brand to realign with the core business strategy. This is something to keep an eye out for if you’re looking to adopt a long position.

Current recommendation of a long position holds, but as mentioned before – be wary of any new developments in the market.

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